Chevron (CVX) Set To Report Q2 Earnings: What To Expect

Chevron Corporation (NYSE:CVX) is expected to report its second quarter earnings at the end of this week. The oil and gas giant has gained 14.3% on the year, outpacing the broader Oil-Integrated market. Chevron is looking to start the second half of 2019 with a solid earnings report to kickstart the company. Our earnings surprise prediction is calling for the company to fall short of estimates by 3.21%. Let’s take a closer look at the company and how they might perform in Q2 2019.

Company Overview

Chevron was founded in 1897 and is one of the largest publicly traded oil and gas companies in the world based on proved reserves. Present-day Chevron is the result of the 2001 merger between Texaco and Chevron Corporation. The company’s key assets are focused in the United States, Australia, most of South America, and eastern and central Asia, while it operates in two main segments, upstream and downstream.

Chevron has extensive upstream operations in all major hydrocarbon-producing regions of the world. The company is primarily involved in the acquisition, development, and exploitation of crude oil natural gas properties. At the end of 2018, Chevron had proved reserves of roughly 12.1 billion barrels of oil-equivalent. The upstream segment comprised nearly 78% of the company’s 2018 earnings.

The company’s downstream segment comprises Chevron’s worldwide portfolio of refining, marketing, distribution, and chemical assets. CVX has nearly 13,000 retail sites worldwide that commercialize refined products under the Chevron, Texaco, and Caltex brands. The downstream segment of the company attributed to 22% of Chevron’s 2018 earnings.

Q1 Recap and Q2 Outlook

In Q1 2019, Chevron beat our earnings estimate by 10.3% with EPS of $1.39. The company fell short in terms of revenue by 7.1% to $2.6 billion. The oil giant’s upstream segment in the United States grew 15.4% to $748 million in Q1. The company’s international upstream segment fell 12.2% from Q1 2018 with $2.38 billion. Chevron attributed the fall off to foreign currency effects having an unfavorable $288 million impact on earnings, largely due to the Venezuelan Bolivar. The company’s downstream segment took a steep fall off all together. Downstream revenue in the U.S. fell 50.9% to $217 million and international downstream revenue fell 87.8% to $35 million. The decrease was attributed to lower margins on refined product sales.

In Q2 2019, Consensus Estimates are calling for earnings to increase 1.12% and sales to gain 0.61% to $42.5 billion. Key Company Metric estimates are forecasting for the company’s upstream and downstream segments to continue their struggles in Q2. Estimates are projecting that upstream revenue in the U.S. will fall 14.4% to $717 million. International Upstream revenue is expected to decline 12.7% to $2.15 billion. Total Downstream revenue is projected to generate $890 million in Q2, which would be down 6.21% from Q2 2018.

Bottom Line

While the company had a shaky start to the year revenue-wise, Chevron has stayed in the green year-to-date. Overall, revenue and earnings are expected to slightly beat their previous year’s numbers, but our ESP is calling for the company to fall short of estimates. KCM estimates are foreseeing for the company to continue their struggles to make year over year gains in Q2. Chevron is currently sitting at a Zacks Rank #3 (Hold). CVX has been able to beat our estimates three out of the last four quarters for an average EPS surprise of 2.33%. Earnings revisions have not ticked favorably for the oil giant, as earnings were revised down with 100% agreement over the last 60 days.

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