Are Chevron’s Earnings Expected to Fall in 2019?

Chevron’s growth estimate

In this article, we’ll look at Chevron’s (CVX) earnings expectations for 2019.

Are Chevron’s Earnings Expected to Fall in 2019?

Chevron is an American integrated energy company with upstream and downstream business segments. Chevron ranks fourth among six integrated firms with a 9% expected fall in EPS in 2019. In 2018, Chevron’s adjusted EPS stood at $7.7. Chevron’s EPS are expected to stand at $7.0 in 2019, which is mainly on account of lower oil price estimates for the year. Also, in Q1 2019, Chevron is expected to see a 25% YoY fall in EPS to $1.4.

Chevron has a robust upstream portfolio that is expected to drive volumes growth for the company. Chevron’s mega-projects like Gorgon, Wheatstone, and Permian have been boosting the company’s volumes. Overall, Chevron expects 4% to 7% growth in production volumes in 2019. In 2018, Chevron achieved 7% YoY growth in volumes. Also, the company’s downstream portfolio will likely support earnings growth. Plus, Chevron has successfully created an integrated earnings model capable of supporting the company’s total earnings in a volatile oil price environment.

Valuations and dividends

Chevron stock trades at a forward PE of 17.0x, above the peer average of 14.5x. The higher valuations that the market accords to Chevron could be due to its balance sheet strength. The company has the second-best debt ratio in the industry. Also, the company has a considerable cash flow surplus.

Moving to dividend yield, Chevron’s current yield stands at 3.8%, below the peer average of 4.6%. However, Chevron announced that it would buy back shares worth around $3 billion every year. Stronger cash flows backed by the upstream volume growth and margins were the reasons behind initiating the share buyback program.

Overall, Chevron has above-average valuations with low dividend yields and an expected fall in earnings in 2019.