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Why Is Chevron (CVX) Down 11.1% Since its Last Earnings Report?

A month has gone by since the last earnings report for Chevron CorporationCVX . Shares have lost about 11.1% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to its next earnings release, or is CVX due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Fourth-Quarter 2017 Results

Chevron reported weaker-than-expected fourth-quarter earnings after excluding the impacts of U.S. tax reform. The company reported adjusted earnings per share of 73 cents, lower than the Zacks Consensus Estimate of $1.27.

However, the bottom line improved significantly from the year-ago profit of 22 cents amid the recovery in oil prices and production gains. The profit growth further confirms the industry's resurgence from the deep oil slump. As a proof of the rebound, Chevron recently hiked its quarterly dividend payments to shareholders by 4 cents to $1.12 per share.

Quarterly revenue of $37,616 million surpassed the Zacks Consensus Estimate of $37,549 million and were up 19.4% year over year.

Segment Performance

Upstream: Chevron's total production of crude oil and natural gas increased 2.7% compared with last year's corresponding period to 2,740 thousand oil-equivalent barrels per day (MBOE/d). The U.S. output fell 1.6% year over year to 671 MBOE/d but the company's international operations (accounting for 76% of the total) was up 4.1% to 2,069 MBOE/d.

Apart from the core business in Gulf of Mexico and higher volumes from shale assets in the prolific Permian Basin, the rise in output could be attributed to contributions from major capital projects - Gorgon and Wheatstone in Australia as well as Angola LNG.

The rise in production was supported by higher oil realizations, the result being a healthy improvement in Chevron's upstream segment profit - from $930 million in the year-earlier quarter to $5,291 million.

Downstream: Chevron's downstream segment achieved earnings of $1,279 million, a massive 258.3% higher than the profit of $357 million last year. The jump primarily underlined benefit from U.S. tax reforms and increase in domestic refined product sales.

Cash Flows

Importantly, Chevron delivered a good cash flow performance this quarter - an important gauge for the oil and gas industry - with $6,230 million in cash flow from operations, up from $3,863 million a year ago.

Capital Expenditures

The company spent $5,435 million in capital expenditures during the quarter, an increase from the $5,261 million incurred a year ago. Roughly 82% of the total outlays pertained to upstream projects.

Balance Sheet

As of Dec 31, 2017, the San Ramon, CA-based company had $4,813 million in cash and total debt of $38,763 million, with a debt-to-total capitalization ratio of about 20.7%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter.

Chevron Corporation Price and Consensus

Chevron Corporation Price and Consensus | Chevron Corporation Quote

VGM Scores

At this time, CVX has a strong Growth Score of A, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for growth investors than value investors.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Interestingly, CVX has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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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.


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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