Financial Pros Love Early Earnings Announcements - InvestingChannel

Financial Pros Love Early Earnings Announcements

Editor’s Note

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Proprietary Data Insights

Financial Pros’ Top Integrated Oil & Gas Stock Searches in the Last Month

#1‘Exxon Mobil Corp225
#2‘Chevron Corp192
#3‘Petroleo Brasileiro S.A. Petrobras39
#4‘BP Plc26
#5‘Ypf Sociedad Anonima15
#ad [FREE REPORT] Q1’s Top 10 Trending Stocks

Chevron (CVX) Announces Earnings Early

Carvana (CVNA) shares exploded when they pre-announced earnings.

So when Chevron (CVX) did the same thing on Sunday, financial pros turned their eyes toward the oil & gas giant.

Despite stagnant energy prices, the company reported earnings of $3.08 per share, beating analyst estimates of $2.97, as Permian Basin production set a quarterly record.

We’ve been a fan of the company for a while. And we’ll show you PRECISELY why.

Chevron’s Business

Integrated oil and gas companies like Chevron compete in at least two of the three oil and gas segments:

  • Upstream: Exploration and production. Profits tie closely to the price of oil and natural gas. Accounted for 75% of Chevron’s six-month earnings total.
  • Midstream: Transportation and distribution. Chevron does not operate in this segment.
  • Downstream: Refining and sales. Accounted for the other 25% of Chevron’s earnings.

Despite being labeled an ‘integrated’ oil and gas company, Chevron is clearly more of an upstream exploration and production company.

Chevron’s holds a fairly diverse asset portfolio, with a significant portion dedicated to shale and tight drilling.

Asset class

Source: CVX Investor Day Presentation 2023

We’ve been a big fan of Chevron’s commitment to returning capital to shareholders through dividends and stock buybacks.

In the company’s latest investor day presentation, they stated any upside cash produced would be used for stock buybacks.

Downside potential

Source: CVX Investor Day Presentation 2023



Source: Stock Analysis

Chevron’s revenues exploded in 2022, largely due to higher commodity prices.

Given OPEC+ latest choice to curtail production, we expect energy prices to remain elevated.

The gross margins don’t really tell the picture as the average cost of production per barrel dropped from 26.9% in 2019 to 10.9% in 2022.

This helped operating cash flow nearly doubled since then while free cash flow (operating cash flow less Capex) more than doubled.

Total debt for the company halved during that same time period while net debt plunged from $48.2 billion to $7.4 billion, all while paying roughly $10 billion in dividends every year and repurchasing roughly $19 billion in stock.



Source: Stock Analysis

Chevron is surprisingly expensive compared to its peers, especially international players like Petrobras (PBR) and British Petroleum (BP) on a P/E basis.

While not shown, the price-to-cash flow of 25.7x is notably higher than its peers, with Exxon Mobil at 19.4x and all other below 10x.

However, all of them are below 8x on a price-to-forward-cash-flow basis, with the three international stocks below 5x.



Source: Seeking Alpha

Revenue growth was pretty solid across the board, with YPF Sociedad Anónima (YPF)  doing the best. However, all show sales growth slowing next year.

Forward earnings and EBITDA are expected to continue pushing higher next year as well.



Source: Seeking Alpha

We prefer to compare the businesses on EBITDA and net income margin.

All the companies are fairly in line, while PBR sits as an outlier largely due to the uncertainty surrounding Brazil’s economy and politics.

Our Opinion 9/10

Chevron is one of the most shareholder friendly companies out there.

They hold a diverse, stable asset base. 

The only knock is their excess leverage to upstream operations. Nonetheless, this is a great holding for any long-term portfolio.

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