Get Ready for Chevron’s 3Q15 Earnings

Chevron (CVX) is expected to release its third quarter earnings on October 30, 2015. This series will focus on the integrated giant’s third quarter earnings estimates and segment-wise performance in the wake of falling commodity prices. Let’s start by looking at CVX’s YTD (year-to-date) returns. The stock closed at ~$90 on October 20.

As we note in the graph above, CVX has mostly been negative in 2015. Since January 2015, it has fallen ~20%. The company has also provided the lowest returns among peers including ExxonMobil (XOM), which has fallen ~13% since the beginning of this year. International peers including Total (TOT) and Statoil (STO) have returned -0.59% and -1.6% respectively. Clearly, its international peers seem to have performed better so far this year.

Comparing the company’s performance to the broader energy sector, or the Energy Select Sector SPDR ETF (XLE), we see that CVX has also underperformed XLE, which has fallen ~15% since January this year. CVX and XOM make up ~30% of the Energy Select Sector SPDR ETF (XLE). CVX is also a component of the Vanguard Energy ETF (VDE) and makes up ~12% of the fund.

While CVX has relatively performed worse than its peers and the broader energy sector, looking at the above graph objectively, we find that most of these energy stocks have given negative returns so far this year.

This trend was born out of the crude oil price crash in June of last year. Crude prices have fallen ~55% since last year. Having said that, Chevron has the advantage of having downstream operations. Downstream or refining companies can benefit from lower crude oil prices as their refining margins increase. Investors will keep a close watch to see if this will be sufficient to tide CVX over until the weakness in the energy sector subsides.

In the following part of this series, we’ll look at CVX’s revenue estimates for 3Q15.