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Chevron retains hold stock rating with solid payout and buybacks

EditorNatashya Angelica
Published 10/21/2024, 08:50 AM
CVX
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On Monday, Truist Securities maintained a Hold rating on Chevron (NYSE:CVX) shares, with a steady price target of $150.00. The firm's assessment acknowledges Chevron's ability to sustain a robust quarterly payout, including nearly $5 billion in share repurchases, despite certain financial pressures.

Chevron faced challenges in the third quarter of 2024 due to turnarounds affecting downstream operations, the Tengizchevroil (TCO) project, and other areas. Moreover, the company settled an Asset Retirement Obligation (ARO) for $600 million, impacting cash flow. However, Chevron's slightly higher production levels and favorable commodity prices, particularly for natural gas, have provided some financial cushion.

The energy company's activity in the Permian Basin is on track to meet its ambitious production goal of 1 million barrels of oil equivalent per day (MMboepd). This is despite Chevron's core operated production in the region being slightly lower than that of other major operators.

Truist Securities pointed out that potential further pressures in downstream operations and other areas are partially responsible for maintaining the $150 price target for Chevron. The price target reflects the balance between the company's operational challenges and its financial strategies aimed at rewarding shareholders.

In other recent news, Chevron has seen a flurry of activity in its financials and operations. BofA Securities has upgraded its price target for Chevron to $168.00, maintaining a Buy rating. The firm anticipates a cash flow inflection for Chevron in 2025/2026, with potential to pay out $16.5 per share in free cash flow in 2027.

Mizuho Securities, however, anticipates a third-quarter earnings miss for Chevron, predicting a shortfall of about 6% compared to market expectations, but remains optimistic about Chevron's long-term outlook, noting a quarter-over-quarter upstream volume growth of about 1%.

Chevron has also made strategic moves, including the divestiture of its Canadian assets for $6.5 billion and increasing its quarterly share buyback program. The divestiture aligns with Chevron's strategy to offload $10 billion to $15 billion in assets by 2028, as noted by TD Cowen, which has maintained its Hold rating and $160.00 price target for Chevron. The acquisition of Hess Corporation (NYSE:HES) is also progressing, expected to be finalized by the third quarter of 2025.

In response to Hurricane Milton, Chevron evacuated personnel and ceased operations at its Blind Faith platform in the Gulf of Mexico. These recent developments highlight Chevron's strategic moves amidst fluctuating oil prices and industry dynamics, as well as its ability to manage its portfolio effectively in a changing energy landscape.

InvestingPro Insights

Chevron's financial resilience, as highlighted in the article, is further supported by data from InvestingPro. The company's market capitalization stands at $275.71 billion, reflecting its significant presence in the oil and gas industry. Chevron's P/E ratio of 13.7 (adjusted for the last twelve months as of Q2 2024) suggests that the stock may be reasonably valued compared to its earnings, aligning with Truist Securities' Hold rating.

InvestingPro Tips reveal that Chevron has raised its dividend for 36 consecutive years and has maintained dividend payments for 54 consecutive years. This impressive track record underscores the company's commitment to shareholder returns, as mentioned in the article regarding its robust quarterly payout and share repurchases. The current dividend yield of 4.33% further emphasizes Chevron's attractiveness to income-focused investors.

Despite the challenges outlined in the article, such as turnarounds affecting operations and the ARO settlement, InvestingPro data shows that Chevron remains profitable, with a gross profit of $76.67 billion over the last twelve months as of Q2 2024. This profitability, combined with the company's ability to cover interest payments with its cash flows, suggests a solid financial foundation that supports its ongoing operations and shareholder returns.

For investors seeking a deeper understanding of Chevron's financial health and future prospects, InvestingPro offers 9 additional tips, providing a comprehensive analysis to inform investment decisions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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