$Chevron(CVX)$ is scheduled to report its quarterly result for period ending 30 September 2024 on 01 November 2024 before the market open.
Chevron is expected to report a fall in its quarterly revenue with a 9.4% decrease in revenue to $48.986 billion from $54.08 billion a year ago.
The earnings per share estimate for Chevron is expected to be at $2.43.
Volatility Coming From Geopolitical tensions and the impending U.S. elections
Geopolitical tensions and the impending U.S. elections are adding volatility to the global oil market as 2025 approaches. Despite weak demand globally in 2024, OPEC+ is potentially prepared to roll back nearly 2.2 MMb/d of voluntary production cuts beginning in December resulting in downside risk for crude pricing in 2025.
However, pricing is expected to remain constructive for year-on-year crude oil production growth in the US. As storage injection season comes to a close, the US natural gas market has become progressively more bearish over the past few weeks despite producers’ efforts to work off the storage inventory surplus by curtailing production volumes.
With building concerns of a warm winter, LNG demand timing slipping, and pent-up supply waiting to hit the market when prices increase this winter, storage inventories could remain elevated in 2025 and weigh on Henry Hub pricing.
Chevron being an integrated energy company, we might not see these impacting it so much, moreover, despite recent underperformance, CVX's strong cash flow, low debt, and commitment to dividends make it a long-term portfolio candidate.
BP Earnings Suffered Due To Refining Margins. Exxon Mobil Might Follow Suit
CVX is an “integrated” energy company, which means it does not only specialize in one of the three main segments of the oil and gas “food chain.”
Some companies drill for fossil fuel, others refine or transport it, and others focus on the end products, such as what we see at the gas station, going into our vehicles.
CVX participates in the first phase (upstream) and the last one (downstream), and this global player also has a chemicals operation.
So as we see oil companies are struggling with a downbeat demand outlook, as China's slowing economy weighs on imports of the commodity and hopes for a de-escalation in Middle East tensions drag prices lower.
CVX might be able to gain from the upstream businesses. So let us look at how the S&P 500 Energy sector have been performing yesterday (31 Oct).
S&P 500 Energy Sector Had A Small Gain Of 0.23%
Despite both $Exxon Mobil(XOM)$ and Chevron losing a small percentage, the energy sector has a small gains of 0.23%. So there might be some strength which could help in CVX share price after its earnings.
I am not expecting an earnings surprise, but the decrease in revenue should not be too wide.
Lower EPS Estimates For Energy Sector For Third Quarter From Analyst. Here’s Why
The Energy sector will be a focus for the market this week, as Exxon Mobil and Chevron are scheduled to report earnings on 01 November. The Energy sector is reporting largest (year-over-year) earnings decline of all eleven sectors in the S&P 500 for Q3 2024 at -27.3%.
Lower year-over-year oil prices are contributing to the year-over-year decrease in earnings for the sector, as the average price of oil in Q3 2024 ($75.27) was 8% below the average price for oil in Q3 2023 ($82.22).
We have seen analysts continued to lower EPS estimates for companies in the Energy sector since the end of the third quarter (September 30), led by Chevron, Exxon Mobile and $Marathon Petroleum(MPC)$ . So now the earnings decline for this sector has increased to around -27% from around 19% on 30 September.
At the sub-industry level, 3 of the 5 sub-industries in the sector are reporting (or are predicted to report) a year-over-year decline in earnings: Oil & Gas Refining & Marketing (-83%), Oil & Gas Exploration & Production (-19%), and Integrated Oil & Gas (-15%).
On the other hand, two sub-industries are reporting year-over-year growth in earnings: Oil & Gas Equipment & Services (13%) and Oil & Gas Storage & Transportation (12%).
The Oil & Gas Refining & Marketing sub-industry is also the largest contributor to the earnings decline for this sector. If this sub-industry were excluded, the blended (year-over-year) earnings decline for the Energy sector would improve to -11.9% from -27.3%.
So I will be watching XOM and CVX earnings closely so as to make sense on which sub-industries contribute or derail their earnings.
Technical Analysis - MACD and Multi-timeframe (MTF)
If we were to look at CVX for a potential trade, we need to be cautious as it is currently trading with the short-term and long-term MA, with long term MA above, normally suggest a downside movement potential.
And the MACD is forming a downside move, and MTF is also showing potential downtrend. So we need to watch the price action closely for CVX if we want to take a trade today (31 Oct)
Summary
We might see CVX other integrated revenue stream helping in the contribution as the refining margins should be weak following the geopolitical in the third quarter. We might want to look at how CVX strong cash flow could help it to continue to maintain its dividends as well.
Appreciate if you could share your thoughts in the comment section whether you think CVX could perform better than BP or Exxon Mobil.
@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
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