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Chevron’s Earnings to Fall in 2019: How’s the Stock Placed?

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Jun. 11 2019, Updated 2:59 p.m. ET

Chevron’s earnings estimate

Wall Street analysts expect Chevron’s (CVX) earnings to fall in 2019. Suncor Energy’s (SU), Royal Dutch Shell’s (RDS.A), and Total’s (TOT) EPS are expected to rise 26%, 8%, and 7%, respectively, in 2019.

Chevron’s EPS are expected to fall 3% to $7.5 in 2019. In 2018, Chevron’s adjusted EPS stood at $7.7. The estimated fall in its earnings is the result of the lower oil price estimate for the year partially offset by higher upstream volumes. Further, in the second quarter of 2019, Chevron is expected to see an 11% YoY rise in its EPS to $2.0.

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Chevron has a robust upstream portfolio. Chevron’s assets at Gorgon, Wheatstone, and Permian are expected to drive volume growth for the company. Overall, Chevron expects 4%–7% growth in production volumes in 2019, supported by its capex activities. In the first quarter of 2019, Chevron’s volumes grew 7% YoY to 3.04 million barrels of oil equivalent per day.

The company’s downstream portfolio will also support its earnings growth, and it’s built an integrated earnings model to support its total earnings in harsh business conditions.

Valuation and dividend yield

Chevron is trading at a forward PE of 14.4x, above the peer average of 12.1x. This high valuation could represent the company’s balance sheet strength. Chevron has the second-best debt ratio in the industry.

Further, Chevron’s current yield stands at 4.1%, below the peer average of 5.1%. However, Chevron expects to buy back shares worth ~$5 billion every year. Stronger cash flows backed by upstream volume growth and margins were the drivers of the company’s initiation of its share buyback program.

Overall, Chevron’s earnings are expected to fall in 2019. The stock is also trading above the average valuation and below the average dividend yield.

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