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Will Chevron’s EPS Fall Short of Analysts’ Estimates?

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Chevron’s EPS estimates

Chevron’s (CVX) 3Q15 EPS (earnings per share) estimates were lower than the previous quarter’s estimates. Its 3Q15 EPS estimate is ~$0.77, which is ~5% higher than the previous quarter’s EPS and ~69% lower than the corresponding quarter’s EPS in 2014.

 

The reason for the lower 3Q15 EPS estimate is the same as we what we discussed in the previous part of this series—lower crude oil prices. In the second quarter, crude oil prices averaged $57.95. This fell to $46.49 in the third quarter. Also, we see in the graph above that Chevron’s EPS fell short of estimates in the previous quarter.

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Comparing Chevron’s EPS to those of its peers, ExxonMobil’s EPS is expected to come in at ~$0.89 in 3Q15, compared to $1 in 2Q15—a 10% fall. International peers Total (TOT) and Statoil (STO) are expected to report 3Q15 EPS of $0.8 and $0.283, respectively—a fall of ~34% and ~3%, respectively, compared to their 2Q15 EPS.

XOM and CVX make up ~30% of the Energy Select sector SPDR ETF (XLE). CVX also makes up ~12% of the Vanguard Energy ETF (VDE).

Investors brace for 3Q15

In the upcoming earnings release, investors expect upstream earnings to take a toll on overall earnings as a result of lower price realizations. Read part 2 of this series for more on this topic.

While the impact of lower crude oil prices will not be that direct on downstream operations, the prices of refined products such as gasoline and diesel, which are benchmarked to Brent oil prices, could slide. Brent fell ~22% in the third quarter. The fall in prices of refined products could lower CVX’s realized refined product prices and hurt its downstream revenues.

An investor presentation released by CVX on September 9 also outlined plans to lower its capital program and expand its assets sale program in response to lower energy prices environment. In the following part of this series, we’ll see if these could have any bearing on Chevron’s Free Cash Flow (FCF).

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