Chevron’s Q4 Earnings: What Are We Watching?

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Chevron Corporation (NYSE: CVX), a company manufacturing and selling a range of refined petroleum products, including gasoline, diesel, marine and aviation fuels, premium base oil, finished lubricants, and fuel oil additives, is scheduled to announce its fiscal fourth-quarter results on Friday, January 27. We expect Chevron stock to see little to no movement due to mixed Q4 results with revenue marginally higher and earnings matching expectations. The oil market is impacted by several different factors, most of which are particularly unpredictable right now. Despite the healthy demand for physical crude oil, certain economic factors stand to dampen the outlook for oil demand. Covid-19 cases are once again rising in China, and the country’s struggle to get its Covid cases under control could impact the demand in the world’s largest crude oil importer. In addition, the continued rising interest rates in the U.S. and the fragile global economy that’s vulnerable to inflation, also pose a threat to the oil market.

Chevron’s first half of FY’23 also could likely reflect lower underlying energy prices and worse macro headwinds. In 2023, China’s recovery from Covid flare-ups will be a critical underpinning to the government’s efforts to rescue its flailing economy. But whether China’s energy demand could be lifted significantly while its industrial activity remains weak will be an important question to address. In addition, it is still important to consider the possibility of a global recession in the coming months. As such, we believe macroeconomics will continue to dominate the stock position of the energy company.

Our forecast indicates that Chevron’s valuation is around $183 per share, which is almost in line with the current market price. Look at our interactive dashboard analysis on Chevron Earnings Preview: What To Expect in Q4? for more details.

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(1) Revenues expected to be slightly above the consensus estimates

Trefis estimates Chevron’s Q4 2022 revenues to be around $58.7 Bil, marginally above the consensus estimate. In the third quarter, the company’s top line grew 49% year-over-year (y-o-y) to $66.6 billion. Chevron’s Q3 worldwide net production totaled 3 million barrels per day, with output in the International segment declining 3% y-o-y due to the end of concessions in Thailand and Indonesia. Its U.S. production increased by 4% y-o-y, mainly in the Gulf of Mexico and the Permian Basin. That said, the company also looks well-positioned to benefit from its growing activity in the Permian Basin. Chevron now expects 2022 Permian production to be at least 15% higher than in 2021. By 2026, the company expects to generate more than $4 billion in free cash flow from oil production in the Permian.

Chevron is lowering its carbon footprint by investing in hydrogen, and alternative fuels like diesel and natural gas produced from renewable feedstocks instead of fossil fuels. It acquired Renewable Energy Group and signed a joint venture with Bunge to develop renewable fuel feedstocks to support future renewable fuel production.

(2) EPS likely to match consensus estimates 

Chevron’s Q4 2022 earnings per share (EPS) is expected to be $4.36 as per Trefis analysis, in line with the consensus estimate. In Q3, the company’s net income jumped to $11.2 billion, or $5.78/share, from $6.1 billion, or $3.19/share, in the year-earlier quarter. It should be noted that profit slipped 3% from its all-time high in Q2 due to more than $600 million in net charges during the third quarter.

(3) Stock price estimate in line with the current market price

Going by our Chevron’s Valuation, with an EPS estimate of around $19.30 and a P/E multiple of around 9.5x in fiscal 2022, this translates into a price of about $183, almost in line with the current market price.

It is helpful to see how its peers stack up. Chevron Peers shows how CVX stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns Jan 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 CVX Return 1% 1% 54%
 S&P 500 Return 5% 5% 79%
 Trefis Multi-Strategy Portfolio 9% 9% 242%

[1] Month-to-date and year-to-date as of 1/25/2023
[2] Cumulative total returns since the end of 2016

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