This Is Why Chevron (CVX) is Set for Strong Q4 Earnings


Chevron Corporation CVX is set to release fourth-quarter results before the opening bell on Jan 28. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of $3.07 per share on revenues of $45 billion.

Let’s delve into the factors that might have influenced the American energy biggie’s performance in the December quarter. But it’s worth taking a look at Chevron’s previous-quarter performance first.

Highlights of Q3 Earnings & Surprise History

In the last-reported quarter, the San Ramon, CA-based integrated player beat the consensus mark on the back of higher commodity prices and production, plus an increase in refined products sales. Chevron had reported adjusted earnings per share of $2.96, ahead of the Zacks Consensus Estimate by 75 cents. Revenues of $44.7 billion generated by the firm had also come in above the Zacks Consensus Estimate of $42.5 billion.

Chevron beat the Zacks Consensus Estimate in two of the last four quarters and missed in the others, which resulted in a negative earnings surprise of 17.4%, on average. This is depicted in the graph below:
 

Chevron Corporation Price and EPS Surprise


Chevron Corporation price-eps-surprise | Chevron Corporation Quote

Trend in Estimate Revision

The Zacks Consensus Estimate for the fourth-quarter bottom line has been revised 2% upward in the last seven days. The estimated figure indicates a turnaround from the previous year’s December quarter, when Chevron incurred a loss of a penny. The Zacks Consensus Estimate for revenues, meanwhile, suggests a 78.3% increase from the year-ago period.

Factors to Consider

Chevron is expected to have benefited from the surge in oil and natural gas realizations. As a reflection of this price boost, the Zacks Consensus Estimate for the fourth-quarter average sales price for crude is pegged at $77 per barrel, up significantly from a year earlier when the company fetched $33 in the United States and $40 overseas. Further, the Zacks Consensus Estimate for the fourth-quarter average sales price for natural gas in the United States is pegged at $4.37 per thousand cubic feet compared to just $1.49 in the corresponding period of 2021. The year-over-year improvement in realizations has most likely buoyed Chevron’s upstream segment revenues and cash flows. As a matter of fact, for the to-be-reported quarter, the Zacks Consensus Estimate for the upstream unit is pegged at a profit of $5.3 billion, indicating a massive jump from the prior-year quarter’s income of $501 million.

Driven by a better macro environment, Chevron has also done a fairly admirable job at increasing refined product sales. Echoing CVX’s healthy downstream dynamics, the Zacks Consensus Estimate for the to-be-reported quarter’s worldwide refined product sales per day is pegged at 2,403 thousand barrels. The projection suggests an increase of 6.9% from the figure reported in the year-ago quarter.

Why a Likely Positive Surprise?

Our proven model predicts an earnings beat for Chevron this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Chevron has an Earnings ESP of +2.53% and a Zacks Rank #3.

Other Stocks to Consider

Chevron is not the only energy company looking up this earnings cycle. Here are some other firms from the space that you may want to consider on the basis of our model:

ExxonMobil XOM has an Earnings ESP of +5.51% and a Zacks Rank #1. The firm is scheduled to release earnings on Feb 1.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Valero Energy Corporation VLO has an Earnings ESP of +3.40% and a Zacks Rank #3. The firm is scheduled to release earnings on Jan 27.

CNX Resources Corp. CNX has an Earnings ESP of +2.33% and is Zacks #3 Ranked. The firm is scheduled to release earnings on Jan 27.

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Chevron Corporation (CVX): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.





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