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Will Chevron's (CVX) High Oil Leverage Boost Q3 Earnings?
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Chevron Corporation (CVX - Free Report) is expected to release third-quarter 2018 results before the opening bell on Friday, Nov 1. The current Zacks Consensus Estimate for the quarter under review is a profit of $2.06 per share on revenues of $42.8 billion.
In the preceding three-month period, the integrated oil and gas company missed the consensus mark by 13.6%, pressured by drop in profits in its downstream business, which refines crude oil into fuels like gasoline and diesel oil.
As far as earnings surprises are concerned, the San Ramon, CA-based U.S. oil major has a mixed record, having gone past the Zacks Consensus Estimate twice in the last four reports. This is depicted in the graph below:
Investors are keeping their fingers crossed and expecting the company to surpass earnings estimate this time around. However, our model indicates that Chevron might not beat on earnings in the third quarter. While the downstream side of the picture appears rather tepid, sentiment across the upstream division is quite encouraging.
Let’s delve deeper and find out the factors impacting the results.
Factors to Consider This Quarter
The increase in output, coupled with the surge in oil prices, should lead to solid upstream earnings growth.
With fundamentals pointing to a tighter market, the Zacks Consensus Estimate for the average sales price for crude oil in third quarter 2018 is $69 per barrel, up from $48 a year earlier. The company’s ‘oilier’ nature of its volume mix positions it to benefit from strengthening oil prices. Further, our model estimates third-quarter production volumes at 2,877 thousand oil-equivalent barrels per day (MBOE/d), improving from 2,826 MBOE/d in the second quarter and 2,717 MBOE/d a year ago.
Consequently, the Zacks Consensus Estimate for Chevron’s upstream segment’s third-quarter income is pegged at $3.9 billion, significantly higher than the reported figure of $489 million in the corresponding quarter of 2017.
However, we expect weak margins to affect the company’s downstream segment bottom line in the third quarter of 2018. We note that the current Zacks Consensus Estimate for the quarterly income is $822 million, down more than 50% from a year ago.
What Does Our Model Say?
Our proven model too does not conclusively predict that Chevron will beat the Zacks Consensus Estimate this quarter. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing 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.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.0%.
Zacks Rank: Chevron currently has a Zacks Rank of 3, which increases the predictive power of ESP. But we need to have a positive Earnings ESP to be sure of the positive surprise.
Note that we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing a negative estimate revision.
Stocks to Consider
While earnings beat looks uncertain for Chevron, here are some firms from the energy space you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:
NOW Inc. (DNOW - Free Report) has an Earnings ESP of +5.61% and a Zacks Rank #2 (Buy). The company is anticipated to release earnings on Nov 1.
Carrizo Oil & Gas, Inc. has an Earnings ESP of +0.18% and a Zacks Rank #2. The company is expected to release earnings on Nov 5.
3 Medical Stocks to Buy Now
The greatest discovery in this century of biology is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating revenue, and cures for a variety of deadly diseases are in the pipeline.
So are big potential profits for early investors. Zacks has released an updated Special Report that explains this breakthrough and names the best 3 stocks to ride it.
Image: Bigstock
Will Chevron's (CVX) High Oil Leverage Boost Q3 Earnings?
Chevron Corporation (CVX - Free Report) is expected to release third-quarter 2018 results before the opening bell on Friday, Nov 1. The current Zacks Consensus Estimate for the quarter under review is a profit of $2.06 per share on revenues of $42.8 billion.
In the preceding three-month period, the integrated oil and gas company missed the consensus mark by 13.6%, pressured by drop in profits in its downstream business, which refines crude oil into fuels like gasoline and diesel oil.
As far as earnings surprises are concerned, the San Ramon, CA-based U.S. oil major has a mixed record, having gone past the Zacks Consensus Estimate twice in the last four reports. This is depicted in the graph below:
Chevron Corporation Price and EPS Surprise
Chevron Corporation Price and EPS Surprise | Chevron Corporation Quote
Investors are keeping their fingers crossed and expecting the company to surpass earnings estimate this time around. However, our model indicates that Chevron might not beat on earnings in the third quarter. While the downstream side of the picture appears rather tepid, sentiment across the upstream division is quite encouraging.
Let’s delve deeper and find out the factors impacting the results.
Factors to Consider This Quarter
The increase in output, coupled with the surge in oil prices, should lead to solid upstream earnings growth.
With fundamentals pointing to a tighter market, the Zacks Consensus Estimate for the average sales price for crude oil in third quarter 2018 is $69 per barrel, up from $48 a year earlier. The company’s ‘oilier’ nature of its volume mix positions it to benefit from strengthening oil prices. Further, our model estimates third-quarter production volumes at 2,877 thousand oil-equivalent barrels per day (MBOE/d), improving from 2,826 MBOE/d in the second quarter and 2,717 MBOE/d a year ago.
Consequently, the Zacks Consensus Estimate for Chevron’s upstream segment’s third-quarter income is pegged at $3.9 billion, significantly higher than the reported figure of $489 million in the corresponding quarter of 2017.
However, we expect weak margins to affect the company’s downstream segment bottom line in the third quarter of 2018. We note that the current Zacks Consensus Estimate for the quarterly income is $822 million, down more than 50% from a year ago.
What Does Our Model Say?
Our proven model too does not conclusively predict that Chevron will beat the Zacks Consensus Estimate this quarter. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing 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.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.0%.
Zacks Rank: Chevron currently has a Zacks Rank of 3, which increases the predictive power of ESP. But we need to have a positive Earnings ESP to be sure of the positive surprise.
Note that we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing a negative estimate revision.
Stocks to Consider
While earnings beat looks uncertain for Chevron, here are some firms from the energy space you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:
Enbridge Inc. (ENB - Free Report) has an Earnings ESP of +5.26% and a Zacks Rank #1 (Strong Buy). The company is anticipated to release earnings on Nov 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
NOW Inc. (DNOW - Free Report) has an Earnings ESP of +5.61% and a Zacks Rank #2 (Buy). The company is anticipated to release earnings on Nov 1.
Carrizo Oil & Gas, Inc. has an Earnings ESP of +0.18% and a Zacks Rank #2. The company is expected to release earnings on Nov 5.
3 Medical Stocks to Buy Now
The greatest discovery in this century of biology is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating revenue, and cures for a variety of deadly diseases are in the pipeline.
So are big potential profits for early investors. Zacks has released an updated Special Report that explains this breakthrough and names the best 3 stocks to ride it.
See them today for free >>