This giant oil company blew right through analysts’ earnings estimates, posting EPS of $2.96, compared to the forecast of $2.21. The shares have a current dividend yield of 4.71%, paid quarterly.
Chevron Corporation (CVX)
From Cabot Dividend Investor
Chevron is the best-run oil major with high margins and can more quickly turn a profit as things improve. Chevron started the pandemic in much better shape than it peers and weathered the storm better. The company has done a stellar job of getting leaner and meaner over the last several years. Chevron’s cost per dollar of BOE produced has fallen from $18 in 2014 to under $10 today. Chevron has lower costs and higher margins than its peers.
The oil giant also hit this recession right. It completed several large projects in the past several years and had already wound down capital expenditures.
There’s an important thing to realize about Chevron. It is skewed more heavily toward oil exploration and production and is more leveraged to oil prices than the other energy majors. It’s loving the current environment. Third-quarter earnings skyrocketed to $6.1 billion, the highest since 2013. Cash flow of $6.7 billion for the quarter was the highest ever.
Yet, despite the stellar performance, CVX is still below the pre-pandemic price. The good times should continue to roll for CVX, which received a slew of analyst upgrades after the third-quarter report.
Energy has cooled off. But it will be back. The strong demand and limited supply dynamic for oil isn’t going away soon. Chevron is highly levered to the price of oil. The next earnings report in January should reflect a huge profit boost as volumes are strong and prices are at the highest level since 2014. The stock is still close to the high and I expect another surge at some point in the near future.
Tom Hutchinson, Cabot Dividend Investor, cabotwealth.com, 978-745-5532, November 10 & 17, 2021