Bet on Big Oil Stocks as a Defensive Hedge Against Market Volatility?

Core Viewpoint - The energy sector, led by Chevron and Exxon Mobil, has outperformed the S&P 500 this year, with crude oil prices rising above $70 a barrel, resulting in an 8% increase in the energy sector compared to a 6% decline in the broader market [1][4]. Performance & Valuation - Chevron and Exxon have year-to-date gains of 16% and 11% respectively, while the tech-centric Nasdaq has declined by 11% [4]. - Both companies trade at forward earnings multiples of 16X, below the S&P 500's 21.2X but above their industry average of 8.4X [7]. - Chevron and Exxon are trading near their decade-long medians in price-to-earnings valuation [7]. Dividends - Chevron offers a 4.12% annual dividend yield, while Exxon provides a 3.36% yield, both exceeding the S&P 500 average of 1.32% and closer to the industry average of 4.32% [9]. Earnings Estimates - Chevron's annual earnings are expected to rise by 3% in fiscal 2025 and by 19% in fiscal 2026 to $12.30 per share, although EPS estimates have declined over 7% in the last 60 days [11][12]. - Exxon's annual EPS is projected to dip by 7% this year but is expected to rebound by 20% in fiscal 2026 to $8.70, with EPS estimates down over 11% for FY26 [14]. Market Outlook - The potential for further upside in Chevron and Exxon stock may depend on the trend of earnings estimate revisions in the coming weeks [15][16]. - An increase in EPS revisions could lead to a buy rating if crude prices remain above $70 a barrel, positioning Chevron and Exxon as potential hedges against market volatility [16].