This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Chevron: It's Cheap But Doesn't Look Cheap

NEW YORK ( TheStreet) -- It's not unusual for investors to proclaim to anyone who cares to listen his or her favorite stock is cheap. But when that stock is also at a 52-week high, it's time to raise eyebrows at the logic.

Somehow, Chevron (CVX - Get Report), which fits this criteria, is still flying under the radar despite gaining more than 17% for the year to date.

Even though rival Exxon Mobil (XOM), which we talked about a couple of weeks ago, garners the lion's share of the media coverage, Chevron has never lost its status as a major oil company that consistently delivers solid profitability. It has consistently maintained one of the best balance sheets of any company in any sector.

But how is it possible, with Monday's close of $124.78, for Chevron to still be cheap?

Chevron didn't knock the cover off the ball this quarter. But given the broad weakness that has hit the entire sector due to weak oil prices, the company didn't have to. Management only needed to show that Chevron's production growth was still progressing. Even though revenue was down 6% year over year (as reported), Chevron still delivered where it mattered.

As disappointing as the revenue number sounds, the Street didn't flinch. Unlike the tech or financial sector, revenue details are not weighed upon too heavily among the energy bigwigs. Investors are more interested in production. Chevron was cheered for the company's 1% year-over-year production growth.


Here, too, Chevron's performance stands out, especially since Exxon just posted its seventh consecutive quarter of year-over-year production decline. Meanwhile, Exxon is still considered the leader in this sector.

Chevron had a 6% revenue decline compared to Exxon, which posted a sales decline of 12% -- I think this supports the idea that perhaps Chevron shares are undervalued. From the standpoint of operating margin, Chevron should command a higher P/E, all things being equal.

On a segmental basis, the Chevron's upstream business was far and away the bread winner this quarter despite upstream profits falling 4% year over year to $1.13 billion due to a combination of lower crude oil prices and higher operating costs.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
CVX $109.87 0.00%
AAPL $130.28 0.00%
FB $81.53 0.00%
GOOG $565.06 0.00%
TSLA $218.42 0.00%

Markets

DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs