On Thursday, Mizuho Securities maintained its Outperform rating on Chevron shares, with a price target set at $189.00. The firm's assessment comes after Chevron's third-quarter earnings per share (EPS) were predicted to fall short of market expectations by approximately 6%. Despite this, Mizuho highlighted Chevron's quarter-over-quarter upstream volume growth of about 1%, driven by robust performance in the Permian Basin, although this was partly negated by unplanned downtime in the Gulf of Mexico (GOM) and stable international production.
Chevron faced challenges this quarter with lower commodity prices and refining margins, which are expected to impact earnings. Nevertheless, the company has made significant strides, including certifying compliance with the Federal Trade Commission's second request regarding its acquisition of Hess Corporation (NYSE:HES), divesting its Canadian assets for $6.5 billion, and raising its quarterly share buyback program to between $4.0 billion and $4.75 billion.
Investor attention is currently on the pending closure of the Hess Corporation deal, which, according to the current arbitration timeline, could be finalized by the third quarter of 2025. In the meantime, Chevron is reportedly continuing to take steps to distinguish itself in terms of value creation.
Mizuho's reiterated price target of $189 per share is based on a net asset value (NAV) calculation. As Chevron navigates the market's headwinds and strategic initiatives, the firm's rating reflects confidence in the oil company's performance and direction.
In other recent news, Chevron Corporation (NYSE:CVX) has maintained its Hold rating and $160.00 price target from TD (TSX:TD) Cowen, following the divestiture of its Canadian assets for $6.5 billion. This key transaction aligns with Chevron's strategy to offload $10 billion to $15 billion in assets by 2028. The assets, located in Alberta, Canada, contributed 84,000 barrels of oil equivalent per day to Chevron's production in 2023.
In the wake of Hurricane Milton, Chevron evacuated personnel and ceased operations at its Blind Faith platform in the Gulf of Mexico. However, the company's other Gulf operations remain unaffected. Analysts from RBC (TSX:RY) Capital Markets and Jefferies have pointed out that falling oil prices may pose challenges for energy companies like Chevron, potentially requiring substantial borrowing to maintain shareholder returns.
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. As Chevron navigates these factors, the company's stock performance and investor sentiment will continue to be influenced by such strategic transactions and oil price trends.
InvestingPro Insights
Chevron's financial profile, as revealed by InvestingPro data, offers additional context to Mizuho's analysis. Despite the anticipated earnings shortfall, Chevron maintains a solid financial foundation with a market capitalization of $273.7 billion and a P/E ratio of 13.6 for the last twelve months as of Q2 2024. This relatively low P/E ratio suggests the stock may be undervalued compared to its earnings potential, aligning with Mizuho's Outperform rating.
InvestingPro Tips highlight Chevron's strength as a dividend player, having raised its dividend for 36 consecutive years and maintained payments for 54 years. This consistency in shareholder returns is particularly noteworthy given the cyclical nature of the oil and gas industry. The current dividend yield of 4.36% is attractive for income-focused investors, especially considering the company's ability to sustain and grow its dividend even in challenging market conditions.
Moreover, Chevron's position as a prominent player in the Oil, Gas & Consumable Fuels industry, coupled with its ability to sufficiently cover interest payments with cash flows, reinforces its financial stability. This aligns with Mizuho's confidence in Chevron's long-term value creation potential, despite short-term headwinds.
For investors seeking a deeper understanding of Chevron's financial health and market position, InvestingPro offers 5 additional tips, providing a more comprehensive analysis to inform investment decisions.
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