Chevron Earnings Preview: Second Quarter 2009

Chevron [[CVX]] is scheduled to report their second quarter 2009 results before the market opens on Friday, July 31. 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 revenues of $32.90 billion and EPS of $1.01. This would represent a 60% decline in revenues from last year’s $82.99 billion in the same period. The current analyst consensus estimates calls for revenues of $32.47 billion and EPS of $.95.


We are expecting solid second quarter results out of Chevron driven primarily by significantly higher oil prices in the quarter. By our estimates, oil prices averaged 38% higher in the second quarter compared to the weak first quarter. This should help drive strong results in the important E&P segment.


Chevron remains one of our top picks in the energy sector. The stock provides a solid 3.8% dividend yield. It trades at a valuation multiple below its peer group. With the economy showing signs of recovery, Wall Street is expecting CVX’s earnings to jump 74% next year.


Share Performance

Since the beginning of the year, Chevron’s shares have fallen over 7%. In 2008, CVX shares fell 21%, but still managed to outperform the 34% decline in the Dow Jones industrial average.



Shares are now trading at 9x consensus 2010 EPS estimates. This is a discount to the relative valuations of their peer group. Based on the stock’s current valuation levels and the beginning signs of a recovery in the economy, we would be buyers of Chevron at these levels.


Recommendation: Buy with an $80 price target.


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