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It’s Friday. Time to give you a stock pick from our sister newsletter, The Spill, so you can think about it over the weekend and maybe make a move Monday morning. While The Juice helps you be better with money across the board, The Spill focuses on stocks financial pros are researching and judges how good of buys they are. If you’re already sold, you can sign up for The Spill – for free – here. |
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Proprietary Data Insights Financial Pros’ Top Integrated Oil & Gas Stock Searches in the Last Month
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Chevron (CVX) Announces Earnings Early |
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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:
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.
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.
Source: CVX Investor Day Presentation 2023 Financials
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. Valuation
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. Growth
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. Profitability
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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