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Is a Beat in Store for Chevron (CVX) This Earnings Season?

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Chevron Corporation CVX is scheduled to release fourth-quarter 2019 results on Jan 31, before the opening bell.

The current Zacks Consensus Estimate for the to-be-reported quarter’s earnings is $1.44 per share on revenues of $38.8 billion.

Against this backdrop, let’s delve into the factors that might have impacted the company’s performance in the December quarter.

As far as earnings surprises are concerned, this San Ramon, CA-based Chevron boasts an excellent record, having surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 14.78%. 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

Factors to Consider for Q4 Results

Chevron’s fourth-quarter bottom line is likely to have benefited from production growth.

In the third quarter, this integrated behemoth’s U.S. output of crude oil and natural gas increased 12.4% to 934 thousand oil-equivalent barrels per day (MBOE/d) from the figure reported in the prior year’s corresponding period. This trend most likely continued in the fourth quarter because of higher production from shale assets in the prolific Permian Basin.

Moreover, the impact of production gain might have merged with steadily improving realized commodity prices. Per the U.S. Energy Information Administration, WTI prices commenced the fourth quarter of 2018 with $75.30 per barrel and exited the period at $45.41 per barrel. However, the fourth quarter of 2019 began with $53.62 a barrel and rose to $61.06 at December end. This pricing uptick is likely to have enhanced Chevron’s upstream earnings and cash flows in the quarter to be reported.

Regarding Chevron’s downstream unit, the Zacks Consensus Estimate for the fourth quarter’s refinery input is pegged at 1,640 thousand barrels per day (mbpd), indicating growth from the year-ago reported level of 1,583 mbpd. This uptrend is expected to have boosted the downstream segment’s results.

What Does Our Model Say?

The proven Zacks model predicts an earnings beat for Chevron this season. The right combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a positive surprise. 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 +3.68%.

Zacks Rank: Chevron carries a Zacks Rank #2, which increases the predictive power of ESP.

Highlights of Q3 Earnings

Chevronreported adjusted third-quarter earnings per share of $1.59, above the Zacks Consensus Estimate of $1.47. This beat was driven by ramped-up production, which inched up almost 3% from the third quarter of 2018.

However, the bottom line was below the year-earlier quarter's earnings of $2.11 per share due to lower oil and natural gas price realizations coupled with weak refined products sales margins in the United States.

Quarterly revenues of $36.1 billion missed the Zacks Consensus Estimate of $39.1 billion and were also down 17.9% year over year.

Other Stocks to Consider

Here are some other stocks worth considering from the energy space as per our model, these too have the right combination of elements to beat on earnings this reporting cycle:

NuStar Energy L.P. (NS - Free Report) has an Earnings ESP of +1.32% and a Zacks Rank of 2. The company is slated to report fourth-quarter earnings on Feb 5.

Plains All American Pipeline, L.P. PAA has an Earnings ESP of +11.57% and a Zacks Rank #3. The company is slated to announce fourth-quarter 2019 earnings on Feb 4.

Magellan Midstream Partners MMP has an Earnings ESP of +3.81% and is Zacks #3 Ranked. The partnership is slated to release fourth-quarter earnings on Jan 30. You can see the complete list of today’s Zacks #1 Rank stocks here.

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