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Analysts’ Favorite Integrated Energy Stocks: Here Are the Top 10

PART:
1 2 3 4 5 6 7 8 9 10 11
Part 5
Analysts’ Favorite Integrated Energy Stocks: Here Are the Top 10 PART 5 OF 11

Analyst Ratings for Chevron: Is Sentiment Turning Sour?

Analyst ratings for Chevron

So far in this series, we’ve looked at the integrated energy companies with more than 75.0% “buy” ratings—Royal Dutch Shell (RDS.A), YPF (YPF), and Suncor Energy (SU). Now we’ll look at the middle companies among our top ten, beginning with Chevron (CVX).

Analyst Ratings for Chevron: Is Sentiment Turning Sour?

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Chevron is an American integrated energy company with upstream and downstream business segments. The company’s market cap (capitalization) of $213.0 billion places it third among the top ten integrated stocks with the most “buy” ratings.

The analyst rating graph above shows that 17 (or 65.0%) of the 26 analysts covering CVX have rated it a “buy” in September 2017. Another eight analysts (or 31.0%) have rated it a “hold.” The remaining one analyst has rated it a “sell.” Other companies in the middle range include Cenovus Energy (CVE), BP (BP), and Eni SpA (E) with “buy” ratings from 54.0%, 50.0%, and 50.0% of analysts, respectively. We’ll look at these companies in detail in the following parts of this series.

Changes in analyst ratings and target price

Compared to September 2016, analyst ratings for Chevron have changed. This time last year, CVX had fewer “buy” ratings and more “hold” ratings. It’s the first company so far in our top ten companies to currently have a “sell” rating.

In the same period, Chevron’s mean target price rose 3.0% to $116 per share, implying only a 2.0% rise from the current level. Its implied gains have fallen from September 2016 to September 2017 due to a steeper rise in Chevron stock of 10.0% compared to a rise in its mean target price of 2.0%. Since July 3, 2017, Chevron stock has risen 7.8%.

Recently, Jefferies cut CVX’s target price to $130 per share. Independent Research lowered Chevron’s target price from $128 to $124 per share. But the company still has “buy” ratings on the stock.

Valuations

Chevron trades at a forward PE (price-to-earnings) multiple of 24.3x, which is above the average forward PE of 22.8x for the ten integrated energy stocks in this series. Chevron also trades at 7.3x for its forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple, which is above the peer average of 6.3x.

The premium the market accords to Chevron is likely due to Chevron’s ability to not only survive the oil price cycle but also to prepare for future growth. Its robust upstream portfolio, its focus on the high-return downstream value chain, and its decent leverage position also attest to that. Chevron is set to benefit from any surge in oil prices with its expanding upstream production. For more on this, please refer to Chevron Revitalizing with Improving Financials, Outperforms SPY.

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