Today is shaping up negative for Chevron Corporation (NYSE:CVX) shareholders, with the analysts delivering a substantial negative revision to this year’s forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
After the downgrade, the consensus from Chevron’s twelve analysts is for revenues of US$117b in 2020, which would reflect a considerable 16% decline in sales compared to the last year of performance. Per-share earnings are expected to jump 77% to US$2.75. Previously, the analysts had been modelling revenues of US$135b and earnings per share (EPS) of US$5.68 in 2020. Indeed, we can see that the analysts are a lot more bearish about Chevron’s prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
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It’ll come as no surprise then, to learn that the analysts have cut their price target 15% to US$109. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Chevron analyst has a price target of US$150 per share, while the most pessimistic values it at US$63.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that sales are expected to reverse, with the forecast 16% revenue decline a notable change from historical growth of 0.3% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 1.1% next year. It’s pretty clear that Chevron’s revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year’s expectations and a falling price target, we wouldn’t be surprised if investors were becoming wary of Chevron.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have estimates – from multiple Chevron analysts – going out to 2022, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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