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Why Most Wall Street Analysts Say Chevron Is a ‘Buy’ in 2018


Mar. 5 2018, Updated 5:15 p.m. ET

Analyst ratings for Chevron

A total 23 Wall Street analysts have ratings on Chevron (CVX). Of the total, 16 analysts (70%) have “buy” or “strong buy” ratings, seven (30%) have “hold” ratings, and none have assigned a “sell” rating on the stock.

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Ratings and target price changes after Q4 earnings

After the Q4 results, Credit Suisse cut its target price on Chevron’s stock, which could be because CVX’s earnings fell short of estimates—presumably leading to a 6% decline in its stock price on its earnings release day. Credit Suisse decreased CVX’s target price from $130 per share to $129 per share. Credit Suisse has a “neutral” rating on the stock. Also, HSBC has cut its target price on CVX from $133 per share to $125.5 per share. Plus, Simmons cut its target price on CVX from $153 to $145. Wells Fargo lowered its target price from $129 to $125.

However, RBC upgraded CVX from “underperform” to “sector perform.” RBC raised CVX’s target price from $115 to $125. Also, Barclays upgraded CVX from “equal weight” to “overweight.” Barclays increased its target price from $130 to $135.

CVX’s mean target price of $136 per share implies an 18% gain from the current level.

Peers’ ratings

Chevron’s peers Royal Dutch Shell (RDS.A), ExxonMobil (XOM), and BP (BP) have “buy” ratings from 91%, 29%, and 46% of analysts, respectively. Total (TOT), Petrobras (PBR), and Suncor Energy (SU) have “buy” ratings from 17%, 39%, and 86% of analysts, respectively.

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But why do most analysts rate Chevron as a “buy?”

CVX plans to strengthen its financials by continuing cost reduction, capex optimization, and divestments.

The company’s 2017 operating expenditure is around 20% lower than its 2014 operating expenditure. Plus, in terms of capital and exploratory spending, Chevron has announced $18.3 billion of capex for 2018, lower than the $18.8 billion we saw in 2017. The decreased capex shows Chevron’s deliberate effort to optimize its capital spending and concentrate on core projects. Also, in terms of divestments, Chevron has divested $5.2 billion worth of assets in 2017, achieving its target range of $5 billion–$10 billion for 2016–2017. CVX’s asset sales stood at $2.8 billion in 2016.

CVX expects to improve its cash flows by focusing on its sturdy upstream and robust downstream portfolios. So, with CVX’s strategy in place and its focus on integrated growth, Chevron (CVX) could see steep growth in earnings in 2018. It’s no wonder the majority of Wall Street analysts rate Chevron a “buy.”

Read on to the next part of this series for Chevron’s capex trends in 4Q17.


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