Core Viewpoint - Chevron Corporation has experienced a strong year with a stock price increase of 16.3% year to date, outperforming ExxonMobil, driven by production growth, shareholder returns, and competitive valuation, but faces challenges from legal issues, asset sale risks, and geopolitical factors [1] Financial Performance - Chevron returned $27 billion to shareholders in 2024 through dividends and stock buybacks, with plans to repurchase $10 billion to $20 billion in shares annually, reducing share count by 3-6% each year [3] - The company has increased its dividend for 37 consecutive years, with the latest hike of 4.9%, resulting in a yield of over 4% [6] Production and Growth - Chevron's upstream portfolio shows strong production growth, particularly from the Permian Basin and Kazakhstan, targeting a 6% annual production increase through 2026 [8] - The Tengizchevroil expansion in Kazakhstan and improved efficiency in the Permian are expected to enhance output and support long-term earnings growth [8] Market and Policy Environment - Chevron stands to benefit from U.S. energy policy shifts favoring domestic oil and gas production, with rising energy demand from AI-driven data centers expected to boost natural gas consumption [9] Valuation - Chevron's valuation is reasonable, trading at an EV/EBITDA multiple of 6.99, which is favorable compared to ExxonMobil, potentially appealing to value-focused investors [10] Acquisition and Legal Challenges - The $53 billion acquisition of Hess Corporation aims to secure a 30% stake in Guyana's Stabroek block, but faces arbitration challenges from ExxonMobil and CNOOC [12] - Chevron is under pressure regarding its operations in Venezuela, with potential revenue losses of $150 million to $200 million per month due to sanctions [13] Asset Management and Divestitures - Chevron generated $7.7 billion from asset sales in 2024, with plans to divest $10-$15 billion worth of assets through 2028, raising concerns about long-term sustainability if profitable investments are not made [14] Downstream Business Performance - The downstream segment has been underperforming, contributing to a Q4 earnings miss with EPS at $2.06, falling short by 14 cents, despite a 10.7% year-over-year revenue increase to $52.2 billion [15] Market Volatility and Earnings Estimates - Broader market volatility and regulatory uncertainties could impact Chevron's future cash flow, with earnings highly sensitive to oil price fluctuations [17] - Recent earnings estimates for 2025 have been revised down, reflecting concerns about potential demand destruction [17] Conclusion - Chevron's strong free cash flow, shareholder-friendly policies, and production growth are positive factors, but geopolitical risks and uncertainty surrounding the Hess acquisition warrant caution, leading to a current Zacks Rank of 3 (Hold) [18]

Investment Rating - The report maintains a "Hold" rating for China Tower Corporation with a target price raised to HKD 13.7, reflecting an increase in valuation from 3.1x to 4.0x based on the 2025 fiscal year EV/EBITDA [1][7][3]. Core Views - China Tower's fiscal year 2024 performance met expectations, with revenue increasing by 4.0% year-on-year to RMB 97.8 billion, and net profit rising by 10.0% to RMB 10.7 billion, slightly above internal forecasts but below Bloomberg consensus [1][2]. - The traditional tower business, accounting for 77% of revenue, saw a modest growth of 0.9%, while the indoor distribution and two wings businesses experienced double-digit growth, achieving RMB 84 billion (up 18%) and RMB 134 billion (up 16%) respectively [1][2]. - The company announced a share consolidation to optimize its capital structure and enhance shareholder value [1]. Financial Summary - Revenue projections for FY25E are set at RMB 101.8 billion, with a growth rate of 4.1% [2][10]. - EBITDA is expected to reach RMB 69.1 billion in FY25E, reflecting a 3.7% increase [2][10]. - Net profit is forecasted to grow by 13.0% to RMB 12.1 billion in FY25E, with earnings per share projected at RMB 0.69 [2][10]. - The company plans to maintain a dividend of RMB 0.42 per share for FY24, indicating a payout ratio of 76% [7][1]. Shareholder Structure - Major shareholders include Citigroup with 9.0% and GIC with 7.0% [4]. Stock Performance - The current stock price is HKD 12.24, with a potential upside of 11.9% to the target price [3]. - The stock has shown a 26.2% absolute return over the past six months [5]. Business Segments - The traditional tower business is expected to face continued pressure due to low single-digit growth forecasts for domestic telecom operators, while the indoor distribution and two wings businesses are anticipated to maintain double-digit growth rates [7][1]. - The indoor distribution business is projected to grow by 14.0% and 11.6% in FY25E and FY26E respectively, driven by market opportunities [7]. - The two wings business, particularly the Tower Intelligence segment, is expected to see significant revenue growth due to projects related to national disaster warning and agricultural protection [7].

Industry Overview - The Zacks Oil and Gas - Refining & Marketing industry includes companies that sell refined petroleum products and non-energy materials, and some operate terminals and transportation services [3] - The primary activity involves buying crude and processing it into various refined products, with refining margins being highly volatile and influenced by inventory levels, demand, imports, and capacity utilization [4] Current Challenges - The industry faces challenges from volatile crude prices, regulatory pressures, and rising operational costs, with seasonal Q4 refining margin weakness and global supply additions potentially impacting profitability [5][6] - Increasing operational costs from store expansions and wage pressures are significant concerns for downstream operators, necessitating careful cost management [7] Long-term Growth Potential - Despite current challenges, the industry is positioned for long-term growth due to strong global demand for refined products, with refining utilization rates remaining high [6] - Companies with integrated refining systems can leverage geographic diversification and operational efficiencies to maximize margins, while investments in refinery optimization and sustainability initiatives provide competitive advantages [6] Industry Performance - The Zacks Oil and Gas - Refining & Marketing industry has underperformed compared to the broader Zacks Oil - Energy Sector and the S&P 500, declining by 10.7% over the past year, while the sector increased by 3.3% and the S&P 500 gained 17.2% [12] - The industry's Zacks Industry Rank is 198, placing it in the bottom 20% of 246 Zacks industries, indicating a bearish outlook [8][10] Valuation Metrics - The industry is currently trading at an EV/EBITDA ratio of 3.64X, significantly lower than the S&P 500's 17.27X and slightly below the sector's 4.21X [14] - Over the past five years, the industry's EV/EBITDA has ranged from a high of 6.96X to a low of 1.80X, with a median of 3.63X [14] Key Companies - **Phillips 66**: Operates 13 refineries with a total capacity of 2.2 million barrels per day, with a market capitalization of $51 billion and a projected earnings growth of 7.8% for 2025 [15][16] - **Marathon Petroleum**: A leading independent refiner with a market capitalization of $45.6 billion, known for its strong cash flow generation and shareholder returns [17][18] - **Valero Energy**: The largest independent refiner in the U.S. with a refining capacity of 3.2 million barrels per day, has a market capitalization of $19.5 billion [19] - **Galp Energia**: A Portuguese integrated energy firm with a market capitalization of $11.4 billion, operates two refineries in Portugal and has a four-quarter average earnings surprise of 51.2% [20]

Core Viewpoint - The Zacks Oil and Gas - Refining & Marketing industry is currently facing challenges such as volatile crude prices, regulatory pressures, and rising operational costs, but it holds long-term growth potential due to strong demand for refined products and strategic investments in optimization and sustainability [1][4]. Industry Overview - The industry comprises companies that sell refined petroleum products and non-energy materials, with primary activities involving the processing of crude and other feedstocks into various refined products. Refining margins are highly volatile and influenced by factors such as inventory levels, demand, imports, and capacity utilization [2]. Trends Defining the Industry's Future - The industry is experiencing pressure on margins due to fluctuating crude prices, regulatory challenges, and seasonal weakness in refining margins. Geopolitical risks and rising operational costs are additional factors impacting profitability [3]. - Despite these challenges, the industry is well-positioned for long-term growth driven by strong global demand for refined products and operational efficiencies [4]. Cost Dynamics - Increasing operational costs from store expansions and wage pressures are affecting financial performance. Competitive pricing in non-fuel categories and slower recovery in discretionary spending further complicate the market landscape [5]. Industry Performance - The Zacks Oil and Gas - Refining & Marketing industry has underperformed compared to the broader Zacks Oil - Energy Sector and the S&P 500 over the past year, with a decline of 10.7% compared to a 3.3% increase in the sector and a 17.2% gain in the S&P 500 [10]. Current Valuation - The industry is currently trading at an EV/EBITDA ratio of 3.64X, significantly lower than the S&P 500's 17.27X and slightly below the sector's 4.21X. Over the past five years, the industry's EV/EBITDA has ranged from 1.80X to 6.96X, with a median of 3.63X [13]. Company Highlights - **Phillips 66**: A leading refiner with a refining capacity of 2.2 million barrels per day, expected to see 7.8% earnings growth in 2025 [15][16]. - **Marathon Petroleum**: An independent refiner with access to lower-cost crude, has a market capitalization of $45.6 billion and has consistently beaten earnings estimates [18][19]. - **Valero Energy**: The largest independent refiner in the U.S. with a capacity of 3.2 million barrels per day, has a strong earnings performance record [21]. - **Galp Energia**: A Portuguese integrated energy firm with a refining capacity in Portugal, has shown a 51.2% average earnings surprise over the past four quarters [22].