According to Stock market news, Chevron Corp (CVX)
exhibited the decline in its stock price by 4% and is being traded at a stock
price of $112.41. The reason attributed was the low earnings reported by the
company for its fourth quarter ended Dec, 2013. Chevron announced its result
for the fourth quarter on January 31st 2014 which suddenly sparked World stock markets news
due to decline in stock market price
of the company.
Company
Overview
Chevron (CVX) is one of the
major players of US energy sector with reputable name in the Oil, Gas and
consumable fuel industry. Company was formulated from ongoing acquisitions and
mergers of oil companies with most famous name to be Standard Oil of California
merged with Gulf Oil in 1984 which was later rebranded as Chevron. Chevron
presents its self as integrated oil company to provide value at every level of
supply chain by its two main segments of upstream and downstream. Earnings and
revenues contributed for the two segments are inversely related as upstream
segment, responsible for oil exploration and production, generates low revenues
but high earnings whereas downstream segment, related to refining and petroleum
products, generates low revenues but
high earnings.
The company has been
generating lucrative revenues from 2010 and has become one of the best stocks to invest in.
Investors looking for value investing in
stock market shares could
consider Chevron as one of the investment
options.
Industry
Analyses
Chevron belongs to the
sub-industry, Integrated Oil and Gas which in terms of market capitalization is
the largest. Company makes to the list of Super majors or Big Oil with other essential
players like Exxon Mobil Corp. and Royal Dutch Shell Plc. Revenues of the
industry for the fiscal year ending 2012 was $4 trillion with sub industry
market capitalization of $2.7 trillion.
Big Four super majors of
industry are Chevron, Exxon, BP PLC and Royal Dutch Shell with the total
reserves in terms of barrel oil equivalents till 2012 to be 11.3 bn, 25.2 bn,
17.0 bn and 13.6 bn, respectively.
Financial
Performance for fourth quarter 2014
Earnings for the fourth
quarter plunged 32% as revenues for the company dropped by $56.25 billion to
$53.95 billion showing YoY decline of 4.26% in revenues. The net income for the
company showed year over year decline of 4.70%, down from $7.25 billion to
$4.93 billion. Earnings per share announced for the fourth quarter is $2.47
down from last year EPS of $3.78, which has missed the analysts’ estimate of
$2.58.
Chevron can accuse its oil
and gas production for the downward trend shown in earnings and revenues as oil
and gas production segment has plunged 3.5% from its preceding year production
of 2576000 oil-equivalents barrel per day. The domestic production dropped by
3% where international oil and gas production exhibited 4% decline. This could
be taken as bigger hit as international market generates around 75% of total
revenues. The effect was doubled due to the hike in natural gas prices which
further narrowed the company’s gross margin.
Investment
Perspective
Despite company missed the
analysts’ estimate of earnings it is still recommended as ‘Buy’ by The Street
Rating Teams. The reason given for recommending it as best
investment stock is the company’s ability to outperform the industry in
terms of growth as industry average stands to be 5.7%. Moreover the last
quarter revenues are still up by 1.6% and though the issues for the low
revenues were faced by all the industry players, Chevron managed to increase
its revenues.
The fact that debt to equity
ratio for the company is lower compared to the industry average and the 33.45%
increase shown in cash flows from operations, both indicates that company has
ability to generate enough cash reserves for the capital expenditure as well as
for the dividend payment thus not to worry the dividend
investors.
As far as stock market price
is considered company has the same closing price compared to the previous year
even though the earnings are low. The impact of low stock price due to earnings is just the effect of overall declining
trend in stock market.
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