Chevron Stock: A Buy Amid the Energy Patch Carnage

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For the energy sector, the last six months have brewed a perfect storm of woes. Flagging economic growth overseas, political turmoil in Russia and the Levant, uncertainty in the eurozone after the leftist electoral victory in Greece, record-high U.S. crude inventories and a deepening oil glut have pushed oil prices to six-year lows.

3 high dividend energy stocks buy nowAnd yet one energy company is not only surviving, but thriving amid the onslaught: Chevron Corporation (NYSE:CVX).

This morning before the market’s opening bell, Chevron earnings actually beat expectations. The surprisingly strong operating results were driven by profits in Chevron’s refining segment and underscore the wisdom of the company’s diversification. As I wrote Oct. 10, Chevron stock is a “defensive growth” play that offers capital appreciation, income and safety.

Beating expectations in this grim energy environment is no small feat. Since their mid-summer highs, oil prices are down more than 50%. As of this writing, West Texas Intermediate stood at about $45 per barrel and Brent North Sea crude at $49, an astonishing tumble in prices that has been decimating energy producers that were once riding high.

Although some say Saudi Arabia’s stoical insistence on not cutting production to boost prices is to hamstring rivals Iran and Russia, there are many who believe it is clearly designed to shake out smaller, highly leveraged shale producers in North America, many of which now face the specter of bankruptcy. The potential fallout among the banks that lent money to these shale-producing upstarts remains to be seen.

However, as the second-largest U.S.-based oil company, Chevron is a vertically integrated giant with the wherewithal to weather the current turmoil in the energy sector, positioning Chevron stock to soar when oil prices inevitably rise again.

CVX boasts a wide range of energy assets, including liquefied natural gas, deepwater platforms located in several promising regions around the globe, proven shale territory in North America, and downstream activities, such as refining and chemicals.

The latter assets — refining and chemicals — held Chevron in good stead in the latest quarter. As most of its peers miss Wall Street’s projections this quarter, Chevron earnings report today handily beat analysts’ expectations.

Chevron’s fourth-quarter earnings per share came in at $1.85 on revenue of $46.1 billion, beating consensus estimates of $1.63 in EPS on $30.6 billion in revenue. Refining and retailing margins buttressed operating results.

Chevron Stock: Inherent Strengths

To be sure, Chevron’s quarterly profit represents a year-over-year decline of about 30%, but considering the collapse of oil prices it could have been considerably worse and reflects the inherent strengths of this “super major.”

Chevron isn’t staying on the sidelines and continues to make big bets on future growth. Earlier this week, CVX together with BP (NYSE:BP) announced that it would begin exploring 24 offshore lease sites in the Gulf of Mexico for potential development. Chevron also announced that it would shell out a quarterly dividend of $1.07 per share in March.

With a market cap of $191 billion, CVX possesses enormous oil and gas reserves that it will be able to leverage far into the future, regardless of the ups and downs of the cyclical oil industry.

The stock is a bargain right now, trading at a trailing 12-month price-to-earnings (P/E) ratio of only 9.3 compared to the P/E of 10 for its peers. With a current dividend yield of 4.2%, Chevron represents a rare mixture of growth, income and stability.

Oil prices will eventually recover; they always do. Buy Chevron stock now while shares are relatively cheap for the growth ride to come.

As of this writing, John Persinos did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/01/chevron-stock-cvx-buy-amid-the-energy-patch-carnage/.

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