Here's How to Play the Chevron Stock Going Into Q4 Earnings

Core Viewpoint - Chevron Corporation is expected to report a significant decline in earnings and revenues for the fourth quarter of 2024, reflecting a challenging market environment and fluctuating commodity prices [1][2][3]. Earnings Estimates - The Zacks Consensus Estimate for Q4 2024 earnings per share (EPS) is $2.19, with revenues projected at $47 billion [1]. - EPS estimates have been revised downward by 10.2% in the past 30 days, indicating a year-over-year decline of 36.5% [2]. - For the full year 2024, revenues are estimated at $196.8 billion, representing a 2.1% decrease year over year, while the EPS consensus is $10.18, reflecting a contraction of approximately 22.5% [3]. Production and Market Dynamics - Chevron's total production volume for Q4 2024 is estimated at 3,342 thousand barrels of oil-equivalent per day (MBOE/d), with a 6.9% increase in output attributed to acquisitions and new projects [10][11]. - Upstream income is forecasted to reach $3.7 billion for the quarter, significantly up from $1.6 billion in Q4 2023, driven by improved production and market conditions [11]. Price Trends - Average monthly WTI crude prices showed a decline in Q4 2024 compared to the previous year, with prices at $71.99, $69.95, and $70.12 per barrel for October, November, and December, respectively [8]. - Natural gas prices exhibited mixed trends, with U.S. Henry Hub prices starting lower than the previous year but rebounding in December [9]. Downstream Challenges - The downstream segment is expected to face headwinds, with a consensus estimate for Q4 downstream income at $115 million, a significant drop from $1.1 billion in the same period last year [12]. Valuation and Performance - Chevron's stock is trading at an attractive EV/EBITDA multiple of 6.28, below its 10-year average and favorable compared to ExxonMobil [15]. - Over the past year, Chevron has underperformed compared to ExxonMobil and the S&P 500 [13]. Strategic Initiatives - The expansion of the Tengiz oil field is anticipated to add 260,000 barrels per day, enhancing free cash flow and long-term production growth [16]. - The company's $53 billion acquisition of Hess introduces growth potential but also integration risks and dependency on crude prices and the Chinese economy [18]. Shareholder Returns - Chevron has a $17.5 billion annual share buyback target and offers a 4.2% dividend yield, although rising payout ratios raise sustainability concerns [17].