The final quarter of 2014 saw profit fall by 30% from the same period the previous year – it was the company’s lowest quarterly profit since 2009. The firm has already cut capital expenditure by 13% this year, and although no job cuts are in the pipeline for now, if the price of oil remains under pressure the headcount could be reduced.
The California-headquartered company halted its share buyback programme in order to hold onto its spare cash, and it is worth noting that Chevron spent $5 billion on stock repurchases last year. The firm was careful to maintain its quarterly dividend of $1.07. The CEO, John Watson, stated keeping the dividend was the ‘highest priority’ for the company. A share buyback scheme is a luxury that shareholders can do without when times are tough, but cutting the dividend is another story. Only when Chevron rethink their dividend policy should traders be worried about the firm’s cash position.
When Chevron reports its first-quarter numbers, the consensus is for revenue of $25.82 billion and earnings per share (EPS) of 79 cents. The fourth-quarter numbers were well received, and revenue came in at $46 billion and EPS was $1.85, and the market was anticipating $30.65 billion and $1.64 respectively. The oil company will report its full-year numbers in January 2016, and the market is expecting revenue of $134 billion and EPS of $3.82, and these forecasts equate to a 36% drop in revenue and a 62% decline in EPS.
Equity analysts hold a bullish outlook on Chevron, and out of the 29 ratings, ten are buys, 17 are holds, and two are sells. The average target price is $113.28, which is fractionally higher than the current price. Investment banks are even more bullish on ConocoPhillips, and out of the 27 recommendations, 14 are buys, 11 are holds, and two are sells. The average target price is $74.65, which is 10% above the current price.
The number of short positions being taken out on Chevron has declined by 15% since the firm posted its fourth-quarter numbers in January.
As the price of oil has crept higher in the past month, so has the share price of Chevron. The initial upside target is $112, and if that mark is cleared traders will look to the 200-day moving average of $114.74. A move lower will find support at $110, and then $109 will be the next level of support.
Chevron is available for extended hours trading.