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Why Wall Street Expects Stellar Earnings from Chevron

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4Q17 estimated and actual performance

Chevron (CVX) is expected to post its 1Q18 results on April 27. Before we proceed with the 1Q18 estimates, let’s recap Chevron’s 4Q17 performance versus estimates.

In 4Q17, CVX’s revenues beat Wall Street analysts’ estimates by 0.1%. In 4Q17, Chevron reported EPS or earnings per share of $1.64. However, adjusting for tax benefits and other special items, Chevron’s adjusted EPS stood at $0.72 in 4Q17. So CVX’s adjusted EPS missed estimated EPS of $1.22 by a whopping ~41% in the fourth quarter. However, Chevron’s 4Q17 adjusted EPS was 243% higher than its adjusted EPS in 4Q16.

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In 4Q17, Chevron’s reported earnings stood at $3.1 billion, compared to $0.4 billion in 4Q16. The 4Q17 earnings also included $2.02 billion of tax benefits (due to US tax reforms), $190 million of charges in regard to its former mining assets, and $96 million in foreign exchange loss. Excluding these items, Chevron’s adjusted earnings stood at $1.4 billion in 4Q17.

Chevron’s 1Q18 estimates

In 1Q18, per Wall Street analysts’ estimates, CVX is expected to post EPS of $1.5, which is 23% higher than its adjusted 1Q17 EPS and a whopping 110% higher than its 4Q17 adjusted EPS. CVX’s revenues are expected to be around $40.6 billion in 1Q18, which is 22% higher than the 1Q17 revenues.

In 1Q18, average crude oil prices have stood higher than in 1Q17, which could lead to higher upstream earnings year-over-year. Also, downstream earnings are likely to be stronger due to higher refining cracks in 1Q18 compared to 1Q17. We’ll review this outlook in the next part of this series.

Chevron’s peers ExxonMobil (XOM), Royal Dutch Shell (RDS.A), and BP (BP) are also expected to post 22%, 33%, and 46% higher EPS in 1Q18 compared to 1Q17. Also, Total (TOT) and Suncor Energy (SU) are likely to post 14% YoY and 15% YoY higher EPS in 1Q18. Petrobras (PBR) is expected to post 27% YoY higher EPS in 1Q18.

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