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Chevron (CVX) Up 1.9% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Chevron Corporation (CVX - Free Report) . Shares have added about 1.9% in that time frame.

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

First-Quarter 2018 Results

Chevron rose almost 2% after the U.S. energy giant reported stronger-than-expected first-quarter earnings amid the recovery in oil prices and production gains. The company reported earnings per share of $1.90, significantly ahead of the Zacks Consensus Estimate of $1.45. The bottom line also improved significantly from the year-ago profit of $1.41.

The profit growth further confirms the industry's resurgence from the deep oil slump.

Quarterly revenues of $37,764 million lagged the Zacks Consensus Estimate of $38,737 on refining weakness but was up 13% year over year.

Segment Performance

Upstream: Chevron’s total production of crude oil and natural gas increased 6.6% compared with last year’s corresponding period to 2,852 thousand oil-equivalent barrels per day (MBOE/d). The U.S. output rose 9.1% year over year to 733 MBOE/d but the company’s international operations (accounting for 74% of the total) was up 5.7% to 2,119 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 LNG developments in Australia.

The rise in production was supported by higher oil realizations, the result being a healthy improvement in Chevron’s upstream segment profit — from $1,517 million in the year-earlier quarter to $3,352 million.

Downstream: Chevron’s downstream segment achieved earnings of $728 million, 21.4% lower than the profit of $926 million last year. The decline primarily underlined a fall in refined products sales margins.

Cash Flows

Importantly, Chevron delivered a good cash flow performance this quarter — an important gauge for the oil and gas industry — with $5,043 million in cash flow from operations, up from $3,777 million a year ago.

Capital Expenditures

The company spent $4,405 million in capital expenditures during the quarter, essentially unchanged from the year-ago period. Roughly 88% of the total outlays pertained to upstream projects.

Balance Sheet

As of Mar 31, 2018, the San Ramon, CA-based company had $6,466 million in cash and total debt of $39,745 million, with a debt-to-total capitalization ratio of about 20.9%.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter compared to one lower. In the past month, the consensus estimate has shifted by 14.8% due to these changes.

Chevron Corporation Price and Consensus

VGM Scores

At this time, CVX has a great Growth Score of A, a grade with the same score on the momentum front. 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for growth and momentum investors than value investors.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Notably, 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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