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Chevron (CVX) to Report Q2 Earnings: What's in the Cards?

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Chevron Corporation (CVX - Free Report) is scheduled to release second-quarter 2021 results on Friday Jul 30, before the opening bell.

The Zacks Consensus Estimate for the to-be-reported quarter is pegged at earnings of $1.50 per share while the same for revenues stands at $35.63 billion.

Against this backdrop, let’s consider the factors that are likely to impact the company’s June-quarter results.

Factors at Play

Chevron's cost-reduction efforts are consistently encouraging. For the 2021-2025 forecast period, the company reiterated its organic capital and exploratory expenditure guidance in the $14-$16 billion range. It doubled its initial estimate of Noble Energy synergies to $600 million, which in turn, is anticipated to lower operating cost by 10% from the 2019 reported levels.

Chevron’s capital-efficient investment plan and cost-effective measure are expected to double its return-on-capital employed. This, in turn, may lead to free cash flow growth of more than 10% and a capital budget as low as $14 billion per year through 2025. All these strategic moves are expected to have driven its second-quarter earnings and cash flows higher.

Per the U.S. Energy Information Administration, the second quarter of this year began with WTI prices trending at $61.45 per barrel. The same exited the period at $73.47. This price rise is expected to have bettered Chevron’s upstream earnings in the quarter under review. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings from the upstream segment is pegged at $3.2billion, indicating growth from the sequential quarter’s reported figure of $2.35 billion.

The second-quarter performance of the company’s downstream business, which manufactures and distributes additives, lubricants and petrochemicals, is expected to have improved sequentially.The Zacks Consensus Estimate for the June-quarter earnings from this segment is pegged at $502 million, suggesting growth from the sequential quarter’s reported figure of $5 million.

On the flip side, Chevron predicts turnarounds and downtime to lower output by 90,000 barrels of oil equivalent per day in the quarter under review, notably in Australia at Gorgon Train 3, where the planned maintenance and repairs of propane vessels took place.

What Does Our Model Say?

The proven Zacks model does not conclusively predict a beat for Chevron this earnings season. The combination of a positive  Earnings ESP  and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.

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

Earnings ESP: Chevron has an Earnings ESP of -1.28%.

Zacks Rank: Chevron has a Zacks Rank #3, currently. You can see  the complete list of today’s Zacks #1 Rank stocks here.

Highlights of Q1 Earnings & Surprise History

Chevron reported adjusted first-quarter earnings per share of 90 cents, missing the Zacks Consensus Estimate of 92 cents. The company earned $1.31 per share in the year-ago period.

Its earnings disappointment reflects lower production and weak refined products margins. This was partly offset by the integrated energy major’s successful cost-reduction initiatives, which aided in reducing capital spending by 43% from the year-ago levels.  

The company generated revenue of $32 billion. The sales figure beat the Zacks Consensus Estimate of $30.9 billion and was up 1.7% year over year on the back of higher commodity prices.

As far as earnings surprises are concerned, this San Ramon, CA-based company’s bottom line surpassed the Zacks Consensus Estimate in one of the trailing four quarters and lagged the same in the remaining three quarters, the average surprise being -11.93%. This is depicted in the graph below:

Chevron Corporation Price and EPS Surprise

Chevron Corporation Price and EPS Surprise

Chevron Corporation price-eps-surprise | Chevron Corporation Quote

Stocks to Consider

While an earnings beat looks uncertain for Chevron, here are some firms from the  energy  space that you may want to consider on the basis of our model:

Murphy USA Inc. (MUSA - Free Report) has an Earnings ESP of +12.58% and is Zacks #3 Ranked at present. The firm is scheduled to release earnings on Jul 28.

Magellan Midstream Partners, L.P. (MMP - Free Report) has an Earnings ESP of +2.32% and is a #3 Ranked player, presently. The firm is scheduled to release earnings on Jul 29.

Royal Dutch Shell PLC (RDS.A - Free Report) has an Earnings ESP of +10.55% and is a #1 Ranked player, presently. The firm is scheduled to release earnings on Jul 29.