On Monday, Truist Securities updated its outlook on Chevron Corporation (NYSE:CVX), raising the stock's price target to $155 from the previous $150. The firm has decided to maintain a Hold rating on the shares. The adjustment reflects the analyst's expectations for Chevron's performance in the upcoming year.
The analyst from Truist Securities anticipates that Chevron will experience minimal earnings and free cash flow (FCF) growth in the next year. This forecast is based on the projection that strong output from the Permian Basin, Tengizchevroil (TCO), offshore ventures, and other upstream activities will be largely counterbalanced by potential pressures on downstream margins and a decline in oil prices.
Despite these challenges, the analyst notes that Chevron could see a shift in financial estimates if the company successfully acquires Hess Corporation (NYSE:NYSE:HES), although such a change would likely have a more significant impact in later quarters as operations in Guyana increase. The analyst expects Chevron to potentially increase its share repurchase rate next year above this year's approximately $17.5 billion pace.
The firm also highlights Chevron's financial health, expecting the company to maintain a strong balance sheet. This outlook is supported by anticipated free cash flow combined with proceeds from asset sales. The slight increase in the price target to $155 reflects these considerations.
In other recent news, Chevron Corporation announced a robust Q3 performance in 2024, recording profits of $4.5 billion, or $2.48 per share. This was driven by a 7% increase in worldwide production and record cash returns to shareholders. The company's plans include asset divestments and cost reductions, with anticipated structural cost reductions of $2 to $3 billion by the end of 2026.
In the Gulf of Mexico, Chevron expects production to grow to 300,000 barrels per day by 2026, and asset sales in Canada, Alaska, and Congo are projected to generate approximately $8 billion before taxes. Despite market volatility, the CEO reaffirmed a commitment to a $17.5 billion share repurchase program.
These recent developments also include advancements in high-pressure technology in the Gulf of Mexico and successful turnarounds at Tengiz and Gorgon facilities. However, the company faces challenges in California's downstream operations due to state policies and uncertainty from the Hess acquisition, which is pending arbitration.
Despite these challenges, Chevron is experiencing strong performance in New Mexico's Delaware Basin, driving growth in the Permian region.
InvestingPro Insights
Chevron's financial stability, as highlighted by Truist Securities, is further reinforced by InvestingPro data and tips. The company's dividend history is particularly noteworthy, with InvestingPro Tips revealing that Chevron has raised its dividend for 36 consecutive years and maintained payments for 54 years. This consistent dividend growth, coupled with a current dividend yield of 4.26%, underscores the company's commitment to shareholder returns, aligning with the analyst's expectation of potential increased share repurchases.
The InvestingPro data shows a P/E ratio of 15.48 (adjusted for the last twelve months), suggesting a relatively reasonable valuation considering Chevron's market position and financial strength. This valuation metric, combined with the InvestingPro Tip that Chevron operates with a moderate level of debt, supports the analyst's view on the company's strong balance sheet.
While Truist Securities anticipates minimal earnings growth, InvestingPro data indicates that Chevron remains profitable, with a gross profit of $75.22 billion over the last twelve months. This profitability, along with the InvestingPro Tip that Chevron's cash flows can sufficiently cover interest payments, reinforces the company's financial resilience in the face of potential market challenges.
For investors seeking a deeper understanding of Chevron's financial position and future prospects, InvestingPro offers 8 additional tips, providing a more comprehensive analysis to inform investment decisions.
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