It has been about a month since the last earnings report for Chevron (CVX - Free Report) . Shares have added about 7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Chevron due for a pullback? 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 drivers.
Chevron Q3 Earnings Top on Crude Strength, Record Output
Chevron reported strong third-quarter results, boosted by rising crude oil prices and record production. This was partly offset by drop in profits in its downstream business, which refines crude oil into fuels like gasoline and diesel oil.
The U.S. energy major reported earnings per share of $2.11, ahead of the Zacks Consensus Estimate of $2.06 and improving significantly from the year-ago profit of $1.03. Quarterly revenue of $44 billion beat the Zacks Consensus Estimate of $42.8 billion and was up 21.5% year over year.
Upstream: Chevron’s total production of crude oil and natural gas increased 8.8% compared with last year’s corresponding period to 2,956 thousand oil-equivalent barrels per day (MBOE/d) – the highest quarterly volumes in the company’s history. The U.S. output rose 22% year over year to 831 MBOE/d while the company’s international operations (accounting for 72% of the total) increased 4.4% to 2,125 MBOE/d.
Apart from the shale assets in the prolific Permian Basin, the record output could be attributed to contribution from its Wheatstone LNG development in Australia.
The rise in production was supported by higher oil realizations, the result being a massive jump in Chevron’s upstream segment profit – from a paltry $489 million in the year-earlier quarter to $3.4 billion.
Downstream: Chevron’s downstream segment achieved earnings of $1.4 billion, 24.3% lower than the profit of $1.8 billion last year. The decline primarily underlined a fall in refined products sales margins in its international operations and lower gain on asset sales.
Cash Flows, Buybacks
Importantly, Chevron delivered a good cash flow performance this quarter – an important gauge for the oil and gas industry – with $9.6 billion in cash flow from operations, up from $5.5 million a year ago. The significant cash flow enabled the company to repurchase $750 million of its own shares, apart from paying the dividend and taking care of capital expenditure.
The company spent $5.1 billion in capital expenditures during the quarter, up from the year-ago period’s $4.5 billion. Roughly 89% of the total outlays pertained to upstream projects.
As of Sep 30, 2018, the company had $9.7 billion in cash and total debt of $36.1 billion, with a debt-to-total capitalization ratio of about 19%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
Currently, Chevron has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Chevron has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.