Chevron Is Highly Sensitive to the Price of Oil as It Provides the Commodity to Many

Chevron is a company that operates in the oil industry by exploring and extracting oil to be used as fuel and other purposes. Being in this industry certainly has it’s ups and downs as they are at the mercy of the price of the underlying commodity. However, with the recent news of OPEC slowing production into a highly saturated market, this certainly will help the fundamental numbers of the company. Also, be sure to look a gross profit when looking at these companies.

Published over a year ago
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Reviewed by Vlad Skutelnik

Taking a look at a recent 8-K filing, we can see the numbers from their third quarter operations. The company reported earnings of $1.3 billion for the third quarter of 2016, compared with earnings of $2.0 billion in the third quarter of 2015. Sales and other operations revenues in the third quarter 2016 were $29 billion, compared to $33 billion in 2015 third quarter. These numbers are expected to be lower due to the low oil prices, but as the price begins to increase, this will certainly help these numbers increase.

Taking a look at the chart, we can see that price has been on steady increase from the year 2003. In mid 2015, we can see price retraced quite drastically and has also rebounded just as nicely. This is what I want to see in a chart because this means people are entering and taking profits, where as with price just going up, people haven’t taken profits on a massive scale. Right now might be a good entry area if you’re playing the ABC structure on the way up. Overall, the chart is looking good and moving with the fundamental numbers.

Typically, a company's financial statements are the reports that show the financial position of the company. There are three main documents that fall into the category of financial statements. These documents include Chevron Corp income statement, its balance sheet, and the statement of cash flows. Potential Chevron Corp investors and stakeholders use financial statements to determine how well the company is positioned to perform in the future. Although Chevron Corp investors may use each financial statement separately, they are all related. The changes in Chevron Corp's assets and liabilities, for example, are also reflected in the revenues and expenses that we see on Chevron Corp's income statement, which results in the company's gains or losses. Cash flows can provide more information regarding cash listed on a balance sheet, but not equivalent to net income shown on the income statement. Please read more on our technical analysis and fundamental analysis pages.
The goal of Chevron Corp fundamental analysis is to do accurate financial forecasts. There are several possible objectives to fundamental analysis, such as projecting of Chevron Corp performance into the future periods or doing a reasonable stock valuation. The intrinsic value of Chevron Corp shares is the value that is considered the true value of the share. If the intrinsic value of Chevron is higher than its market price, buying is generally recommended. If it is equal to the market price, it is recommended to hold; and if it is less than the market price, then one should sell all shares Chevron Corp. Please read more on our fundamental analysis page.

How effective is Chevron Corp in utilizing its assets?

Chevron Corp reports assets on its Balance Sheet. It represents the amount of Chevron resources that either has an existing economic value or will provide some form of benefits in the future. By effectively utilizing its assets, Chevron Corp aims to generate revenue, control costs, drive operational efficiency, and enhance profitability. Optimizing asset utilization helps maximize shareholder value and maintain a competitive position in the Oil, Gas & Consumable Fuels space. To get a better handle on how balance sheet or income statements item affect Chevron volatility, please check the breakdown of all its fundamentals.

Are Chevron Corp Earnings Expected to grow?

The future earnings power of Chevron Corp involves the interaction of many company-specific, industry, and economic forces. Earnings estimates embody investors' opinions of Chevron Corp factors such as sales growth, product demand, competitive industry environment, profit margins, and cost controls. Chevron Corp stock prices adjust as these expectations change or are proven wrong. The main thing to remember is that equities with high expected earnings growth tend to underperform the market because it is usually difficult to meet the market's high expectations. Companies with low earnings expectations tend to do better than expected. Please use our latest analysis of Chevron expected earnings.

And What about dividends?

A dividend is the distribution of a portion of Chevron Corp earnings, decided and managed by the company's board of directors and paid to a class of its shareholders. Note, announcements of dividend payouts are generally accompanied by a proportional increase or decrease in a company's stock price. Chevron Corp dividend payments follow a chronological order of events, and the associated dates are important to determine the shareholders who qualify for receiving the dividend payment. Chevron one year expected dividend income is about USD3.98 per share.
Dividend Payout Ratio is likely to rise to 0.56 in 2024, despite the fact that Dividends Paid is likely to grow to (10.8 B).
Last ReportedProjected for 2024
Dividends Paid-11.3 B-10.8 B
Dividend Yield 0.04  0.03 
Dividend Payout Ratio 0.53  0.56 
Dividend Paid And Capex Coverage Ratio(7.92)(7.53)
Investing in dividend-paying stocks, such as Chevron Corp is one of the few strategies that are good for long-term investment. Ex-dividend dates are significant because investors in Chevron Corp must own a stock before its ex-dividend date to receive its next dividend.
This type of analysis is very useful when you want to generate a past dividend schedule and payout information for Chevron Corp. Then that information in the form of graph and calendar can be used to fully explain how Du Pont dividends can provide a real clue to its valuation.

Chevron Corp Gross Profit

Chevron Corp Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing Chevron Corp previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show Chevron Corp Gross Profit growth over the last 10 years. Please check Chevron Corp's gross profit and other fundamental indicators for more details.

Another angle On Chevron Corp

Risks

Being in the oil industry certainly has risks that are similar across the board, but here are a few that are taken from the company’s most recent 10-K filing. Chevron is exposed to the effects of changing commodity prices. This is very true, and to go along with that, they are subject to supply and demand. A company who is not built well will bend under these conditions causing issues for the company and potentially investors. The company also states that the scope of business will decline if they are unable to successfully develop resources. In simple, if they are unable to get oil and other raw materials, they will lose money.

Conclusion

Chevron is a solid company and can certainly be a welcomed addition to many portfolios. The key here is to not be over exposed to this market as it does change rapidly depending on oil price. Also, compare other companies and there are a few others in the same market place. Lastly, you can consult an investing professional and they can help guide you to the right decision.

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Editorial Staff

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Nathan Young do not own shares of Chevron Corp. Please refer to our Terms of Use for any information regarding our disclosure principles.

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