Earnings Scorecard: Chevron

Late last month, U.S. energy giant Chevron Corporation (CVX) announced its financial results for the first-quarter 2011.

Now that the analysts have had some time to ponder over the quarterly performance of Chevron, they are weighing their estimate revisions. Below we cover the results of the recent earnings announcement, subsequent analyst estimate revisions and Zacks ratings for the outlook.

Earnings Review

On April 29, 2011, Chevron reported a jump in its first-quarter 2011 profits, benefiting from higher oil prices and stronger refining margins.

Earnings per share (excluding adjustments for foreign-currency effects) came in at $3.17, above the Zacks Consensus Estimate of $2.99 and the year-ago adjusted profit of $2.37. Quarterly revenue rose 25.2% year-over-year (from $48,179.0 million to $60,341.0 million) and was 10.9% above our projection.

(Read our full coverage on this earnings report: Chevron Profits Soar Past Forecasts)

Agreement of Estimate Revisions

Analysts exhibit a strong bullish sentiment regarding Chevron’s 2011 and 2012 outlooks. In particular, we see a notable number of earnings per share estimate revisions over the past 30 days, indicating that revisions were in response to the company’s March quarter earnings release.

Out of 20 analysts covering the stock, 11 have revised their estimates for 2011 upward, while 4 have gone in the opposite direction. The trend is similar for 2012 as well. Out of 19 analysts, 12 raised their estimates as against 2 negative revisions.

Estimates are up for the June quarter of 2011 as well. For the current quarter, 8 of the 17 analysts have increased their estimates over the last 30 days, compared to 4 negative adjustments.

This uptrend in estimate revisions reflects strong near-term financial results for Chevron with the expectation that cash flows will be driven by fundamental improvement in the business. Given the improved overall economic environment and high crude prices, we see a consistent stream of earnings form the company’s operations.

Magnitude of Estimate Revisions

As a result of the analysts revising estimates northward over the past 30 days, the Zacks Consensus Estimate for fiscal 2011 has gone up by 56 cents (from $12.22 to $12.78), while for 2012, estimates have improved by 42 cents (from $12.72 to $13.14). Meanwhile, for the second quarter of 2011, estimates have increased by 21 cents (from $3.18 to $3.39) in the last 30 days.

Our Recommendation

We have recently upgraded Chevron shares to Outperform from Neutral.

With the economic rebound strengthening and oil prices rallying, we expect integrated oil companies to continue growing revenue and earnings over the next few quarters. Apart from the economic recovery, Chevron’s recent results have also benefited from its operational and production efficiency and contributions from large, multiyear growth programs.

The second-largest U.S. oil company by market value after ExxonMobil Corp. (XOM) has been able to boost returns and remain competitive by embarking on aggressive cost reduction initiatives, exiting unprofitable markets and streamlining the organization.

We therefore believe that the company offers meaningful long-term upside potential for investors. Our long-term Outperform recommendation is supported by a Zacks #2 Rank (short-term Buy rating).

EXXON MOBIL CRP (XOM): Free Stock Analysis Report

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