TLDR
- Chevron (CVX) stock rose about 2% to roughly $236 after Q3 earnings topped estimates
- Earnings came in at $9.9 billion, or $5.06 a share, against the $4.87 analysts expected
- Revenue jumped 36% to $67.8 billion, with Brent crude near $117 a barrel
- The company is not raising spending or payouts despite the cash windfall
- Chevron could have negative net debt by this time next year
Chevron (CVX) stock rose about 2% in early trading Friday after the company beat third-quarter targets. The stock reached $236.18, a new all-time high, after touching $234.39 earlier in the session.
The oil major reported earnings of $9.9 billion, or $5.06 a share. Analysts polled by FactSet expected $4.87 a share.
Revenue climbed 36% from a year ago to $67.8 billion. Wall Street had forecast $61.8 billion.
A year ago, Chevron reported earnings of $1.85 a share on revenue of $49.7 billion. That makes this quarter a big step up.
Higher oil and gas prices drove the results as conflicts in Europe and the Middle East tighten supply. Brent crude traded at $117 on Friday, up 80% from a year ago.
Stock Hits a Record High
The stock was up 52% for the year through Thursday’s close. Investing.com data shows a market value of $454 billion, a P/E ratio of 22.19 and a dividend yield of 3.08%.
Analysts had been raising targets ahead of the report. Goldman Sachs lifted its price target to $241 with a Buy rating. Mizuho moved to $234 and UBS to $235.
William Blair started coverage with an Outperform rating. It pointed to a valuation of 5.8 times EV/EBITDAX.
Options data had pointed to a move of about 2.3% after the report. The actual first reaction landed close to that.
Spending Plans Stay the Same
Chevron said it is not changing its approach because of the windfall. It is not raising capital spending to chase higher prices.
The company also has not increased shareholder payouts since the war began. It spent slightly less on buybacks this quarter than a year ago, even though free cash flow is now more than double.
CFO Eimear Bonner told Barron’s the company will not try to guess where oil goes next. “It’s very, very hard to predict prices,” she said.
She noted oil traded from the $60s to well over $100 during the quarter. Spending more now could look like a mistake if prices fall next year.
“We have a strong record of being consistent through the cycles,” Bonner said. She added that capital allocation is not changing for now.
Cash Builds Up
Analysts expect Chevron to produce $11.4 billion in free cash flow. Some of that money could go toward paying down debt.
The company began the year with $34 billion in net debt. At current rates, it could reach negative net debt by this time next year.
Having cash piling up is a nice problem to have, though it leaves choices to make. The stock already set records this month.
On Friday, Chevron traded near $236, up about 2% on the day, with Brent crude at $117 a barrel.
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