Chevron Earnings Preview: First Quarter 2009

Chevron [[CVX]] is scheduled to report their first quarter 2009 results before the market opens on Friday, May 1. Based on our analysis, we at are expecting CVX to report disappointing results that fail to meet Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting EPS of $.76. This would represent a 69% decline in earnings from last year’s $2.48 EPS in the same period. The current analyst consensus estimates calls for earnings of $.80 per share.


On April 9, the company announced that earnings for the first quarter 2009 are expected to be “sharply lower” than in the fourth quarter of 2008 due to lower prices for crude oil and natural gas and narrower margins on the sale of refined products.


Wall Street has reduced their expectations for 2009 in the wake of lower oil prices, but we feel that they may still be too optimistic.


Share Performance

Since the beginning of the year, Chevron’s shares are down 13%. In 2008, CVX’s shares fell over 42% as the stock underperformed the 34% decline in the Dow Jones index.



Shares are now trading at 9x consensus 2010 EPS estimates. This is slightly below the relative valuations of their peer group. While we expect to see oil prices increase over the next 12-18 months, it appears that Wall Street’s 2010 estimates are still overly optimistic. We would expect that the stock may pull back further as analysts reduce their 2009 and 2010 estimates which could present an attractive entry point.


Recommendation: Hold with a $65 price target.


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