Chevron Corporation CVX delivered a mixed fourth-quarter performance, leaving investors uncertain about its future trajectory. The company reported adjusted earnings per share of $2.06, missing the Zacks Consensus Estimate of $2.19 and falling well below the prior year’s $3.45. However, revenues came in at $52.2 billion, beating expectations and increasing 10.7% year over year. Despite the earnings miss, CVX hiked its quarterly dividend by 5% to $1.71 per share, translating to an attractive yield of around 4.5%.
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Following the earnings release, Chevron stock fell 4.5% but is up nearly 6% year to date, outperforming ExxonMobil’s XOM modest 2% gain. With mixed signals from the company’s financials and operations, investors are left wondering — should they buy, hold, or sell CVX stock?
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Strong Revenues, Production Growth and Other Positives
Revenue Growth & Dividend Hike: Despite weaker earnings, Chevron’s revenue growth stands out. This was driven by better-than-expected U.S. upstream production, which reached 1,646 thousand barrels of oil equivalent per day (MBOE/d), surpassing the consensus forecast of 1,635 MBOE/d. Chevron also remains committed to rewarding shareholders, as evidenced by the dividend increase. This move reassures investors of Chevron’s strong cash flow generation and long-term commitment to shareholder returns, even in a challenging earnings environment.
Permian Basin Expansion Strengthens Long-Term Growth: Chevron’s upstream production growth continues to be a bright spot, particularly in the Permian Basin. U.S. output increased by 3% year over year, with Permian production hitting record levels. This expansion helps offset declines in international production, which fell by 5%. The company’s long-term growth strategy includes a major acquisition of Hess HES, giving it a stake in Guyana’s high-margin offshore fields. If this deal successfully materializes, it could provide a significant boost to Chevron’s future earnings.
AI and Power Generation: Chevron is leveraging its expertise in natural gas to supply power to AI-driven data centers, recognizing the soaring energy demand. The company recently formed a partnership in this regard with investment firm Engine No. 1. These facilities will be strategically located in the U.S. Southeast, Midwest, and West, with operations set to commence by late 2027. Unlike ExxonMobil, Chevron is focusing on forming partnerships rather than building and operating plants itself.
CVX’s Refining Woes, Earnings Downgrades and Other Negatives
Weak Refining Margins Weigh on Profits: Chevron’s downstream segment reported a $248 million loss in Q4 — its first refining loss in four years — compared to a $1.1 billion profit in the prior year. This decline was due to lower refined product margins and higher operating costs in the U.S. The company’s heavy exposure to West Coast refining, particularly in California, puts it at a disadvantage compared to ExxonMobil, whose Gulf Coast operations benefit from stronger refining economics. If this trend persists, it could continue to erode Chevron’s overall profitability.
Falling Free Cash Flow May Lead to Reduced Buybacks: Chevron’s free cash flow (FCF) fell 46% year-over-year in Q4 to $4.4 billion, significantly trailing the $7.3 billion spent on dividends and share repurchases. With management unlikely to stretch its balance sheet further, buybacks could decline this year. This could dampen investor sentiment, particularly as ExxonMobil maintains aggressive capital returns.
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Earnings Estimate Downgrade Signals Uncertainty: Over the past seven days, the Zacks Consensus Estimate for Chevron’s 2025 earnings has moved lower, reflecting concerns over refining weakness and commodity price volatility. The company remains highly sensitive to fluctuations in oil and gas prices, and any unexpected downturn in Oil/Energy markets could put further pressure on its earnings outlook.
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A Word on Chevron’s Valuation
Chevron’s stock has corrected recently, making it appealing to value investors. With respect to forward 12-month Price/Earnings, the company currently trades at a discount relative to its larger rival ExxonMobil. This undervaluation is confirmed by a Zacks Value Score of B.
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Conclusion: CVX is a Hold for Now
Chevron’s Q4 results were a mix of strengths and weaknesses. The company’s strong revenue growth, Permian Basin expansion, and shareholder-friendly dividend policy provide reasons for optimism. However, weak refining margins, a sharp decline in free cash flow, and lower earnings estimates create near-term headwinds. Given these conflicting signals, CVX stock appears fairly valued at current levels, making it a Zacks Rank #3 (Hold) for now. Despite Chevron’s relative undervaluation, investors may want to wait for a clearer outlook on refining performance and the Hess acquisition before making a decisive move.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Chevron Corporation (CVX) : Free Stock Analysis Report
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
Hess Corporation (HES) : Free Stock Analysis Report
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