Last week, you might have seen that Chevron Corporation (NYSE:CVX) released its annual result to the market. The early response was not positive, with shares down 3.7% to US$106 in the past week. It looks like a pretty bad result, all things considered. Although revenues of US$147b were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 77% to hit US$1.54 per share. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there’s been a strong change in the company’s prospects, or if it’s business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the latest consensus from Chevron’s 13 analysts is for revenues of US$150.9b in 2020, which would reflect a modest 3.0% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to bounce 321% to US$6.55. Yet prior to the latest earnings, analysts had been forecasting revenues of US$153.7b and earnings per share (EPS) of US$7.23 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share forecasts for next year.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$133, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. The consensus price target just an average of individual analyst targets, so – considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Chevron at US$151 per share, while the most bearish prices it at US$106. As you can see, analysts are not all in agreement on the stock’s future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. Analysts are definitely expecting Chevron’s growth to accelerate, with the forecast 3.0% growth ranking favourably alongside historical growth of 0.5% per annum over the past five years. Compare this with other companies in the same market, which are forecast to see a revenue decline of 3.7% next year. So it’s clear that despite the acceleration in growth, Chevron is expected to grow meaningfully slower than the market average.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that Chevron’s revenues are expected to perform worse than the wider market. The consensus price target held steady at US$133, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for Chevron going out to 2022, and you can see them free on our platform here.
You can also see whether Chevron is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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