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Chevron Stock Falls After Earnings Miss

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Chevron’s stock is still near its all-time high.
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Chevron stock was falling in premarket trading on Friday after the oil giant missed earnings expectations.

Chevron (ticker: CVX) reported $4.9 billion in adjusted earnings, or $2.56 a share, on $48.1 billion in revenue in the fourth quarter. Analysts had expected earnings of $6 billion, or $3.13 a share, on $45.3 billion in revenue, according to FactSet.

Shares were down 3% in premarket trading.

“It’s primarily due to some noncash charges,” Chevron Chief Financial Officer Pierre Breber said in an interview with Barron’s. Breber pointed to items like depreciation and timing effects of inventory changes that “are hard for analysts to forecast.”

Analysts at Tudor Pickering Holt wrote that the company’s free cash flow also missed expectations, and its production guidance for 2022 was also slightly lower than what Wall Street had anticipated.

The drop still leaves the stock just off its all-time high, and has otherwise been a Wall Street darling. It rebounded faster during the pandemic than other big oil companies, and its dividend was never considered in serious danger like its rival Exxon Mobil (XOM).

Shares of Chevron had risen 2% on Thursday after announcing a 6% dividend increase and telling investors that it would buy back shares at the high end of its guidance. Its dividend yield is now 4%.

“In 2021, we delivered record free cash flow and accelerated our progress toward a lower carbon future,” said Mike Wirth, Chevron’s chairman and chief executive, in a statement.

Investors sometimes worry when companies buy back stock after hitting new highs. Research has shown that companies on average have mediocre timing on buybacks, often scooping up shares when they’re pricey. But Breber said that Chevron is “not one of those companies.” 

The company’s balance sheet is in strong shape to keep the purchases going, he said.

“We like to keep our net debt ratio in the current range where it’s at, so that we can continue buybacks when the cycle does turn down, and we can then lever back up to a higher net debt ratio—our preferred range is 20 to 25%—over the cycle,” he said.

Write to Avi Salzman at avi.salzman@barrons.com

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