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What's in the Cards for Chevron (CVX) This Earnings Season?

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Chevron Corporation (CVX - Free Report) is scheduled to release first-quarter 2020 results on May 1, before the opening bell.

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is 64 cents per share and revenues is $29.88 billion.

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

Factors at Play

Chevron’s first-quarter bottom line is likely to have improved on production growth. In the last reported quarter, this integrated behemoth’s total output of crude oil and natural gas came in at 3,078 thousand oil-equivalent barrels per day/MBOE/d (61.5% liquids), marking the fifth successive quarter wherein volumes exceeded 3 million barrels per day. This impressive production trend most likely continued in the first quarter on the back of higher production from shale assets in the prolific Permian Basin and the Wheatstone LNG development in Australia. The Zacks Consensus Estimate for first-quarter production is pegged at 3,083 MBOE/d, indicating a 1.5% increase from the year-ago reported figure of 3,038 MBOE/d.

However, this production gain is likely to have been offset by lower realized commodity prices. By now, we are aware that the oil price has been trending in the bear market following the coronavirus pandemic’s adverse impact on global energy demand. As a result, the outlook for all industries in the energy sector seems dull.  Per the U.S. Energy Information Administration, WTI prices started the first quarter of 2019 at $46.54 per barrel and exited the period at $60.14. At the outset of the first quarter, prices were at $61.18 a barrel but later plunged to $20.48 at March-end. The year-over-year fall in realizations is expected to have impacted Chevron’s upstream earnings and cash flows in the quarter under review.

Regarding Chevron’s downstream unit, the Zacks Consensus Estimate for the to-be-reported quarter’s income is pegged at $256 million, suggesting growth from the year-ago level of $252 million. Meanwhile, the company predicts refinery turnaround costs (after tax) to be $100-$200 million.

What Does Our Model Say?

The proven Zacks model does not conclusively predict an earnings beat for Chevron this season. The 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 +2.25%.

Zacks Rank: Chevron carries a Zacks Rank #5 (Strong Sell), which decreases the predictive power of ESP.

Highlights of Q4 Earnings & Surprise History

Chevron reported adjusted fourth-quarter earnings per share of $1.49, above the Zacks Consensus Estimate of $1.47. The beat was driven by strong production from the Permian Basin.

However, the bottom line declined from the year-earlier quarter's earnings of $2.06 per share due to lower oil and natural gas price realizations.

The company generated revenues of $36.4 billion in the fourth quarter, missing the Zacks Consensus Estimate of $39.8 billion. The top line was also down 14.2% year over year.

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 12.58%. 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 earnings outperformance looks uncertain for Chevron, here are some firms worth considering from the energy space on the basis of our model, which shows that these have the right combination of elements to outpace estimates this reporting cycle:

Transocean Ltd. (RIG - Free Report) has an Earnings ESP of +0.56% and a Zacks Rank #3. The company is scheduled to release earnings on Apr 29. You can see the complete list of today’s Zacks #1 Rank stocks here.

Southwestern Energy Company (SWN - Free Report) has an Earnings ESP of +3.90% and a Zacks Rank #2. The firm is scheduled to release earnings on Apr 30.

Laredo Petroleum, Inc. (LPI - Free Report) has an Earnings ESP of +2.50% and is Zacks #3 Ranked. The firm is scheduled to release earnings on May 6.

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