) hit a 52-week high of $122.33 on May 2. In fact, the San Ramon,
Calif.-based energy giant has seen its stock price climb some 10%
since the beginning of the year. This price appreciation can be
attributed to the consistency in its earnings/cash flows,
attractive fundamentals and a shareholder friendly financial
Why the Bullishness?
Chevron's current oil and gas development project pipeline is
among the best in the industry - targeting volume growth of 25%
by 2017 - driven by the big Australian liquefied natural gas
(LNG) projects (Gorgon and Wheatstone), as well as deepwater
developments in the U.S. Gulf of Mexico.
While commodity prices are expected to stay lukewarm and
adversely impact upstream profits, Chevron's ability to generate
earnings from the downstream unit provides it with a competitive
The company's financial flexibility and strong balance sheet are
real assets in this highly-uncertain period for the economy.
Chevron remains in excellent financial health, with $17 billion
in cash on hand and an investment-grade credit rating with a
debt-to-capitalization ratio of just over 9%.
Management has established quite a track record of conservative
capital management and cash returns to shareholders. The
second-largest U.S. oil company by market value after
Exxon Mobil Corp.
) also pays a growing dividend, currently yielding an attractive
However, due to its integrated nature, Chevron is particularly
susceptible to the downside risk from any weakness in the global
economy. We are also concerned by the company's high level of
capital spending, which may result in reduced returns going
This accounts for Chevron's current Zacks Rank #3 (Hold),
implying that it is expected to perform in line with the broader
U.S. equity market over the next one to three months.
Stocks to Consider
With Chevron shares trading at all-time highs, any upside from
here may be limited. Meanwhile one can look at some domestic
upstream energy firms like
EPL Oil & Gas Inc.
Harvest Natural Resources Inc.
) as attractive investments. These U.S. exploration and
production companies - sporting a Zacks Rank #1 (Strong Buy) -
offer value and are worth accumulating at current levels.
CHEVRON CORP (CVX): Free Stock Analysis
EPL OIL&GAS INC (EPL): Free Stock Analysis
HARVEST NATURAL (HNR): Free Stock Analysis
EXXON MOBIL CRP (XOM): Free Stock Analysis
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