Will This Downgrade Hurt Chevron (CVX) Stock Today?

Story updated at 10 a.m. to reflect market activity.

NEW YORK (TheStreet) -- Chevron (CVX) was downgraded to "equal weight" from "overweight" by Morgan Stanley (MS) Monday.

Chevron was falling -0.5% to $127.31 in morning trading.

The firm raised its price target for the company to $140 from $135. Morgan Stanley analysts Evan Calio, Benny Wong, and Manav Gupta expect Chevron's production to be flat in 2015.

"We believe CVX's longer-term relative growth profile and free cash flow (FCF) inflection remains on-track, yet we expect 2015 will be a relatively flat year for production and we see more balanced 12-month risk reward," the analysts wrote. "We also see production risk to 2H14 and higher capex risk in 2015 as the last phase of spending kicks in some of CVX's major growth projects. We still believe relative performance on a 3-year basis, yet weighted towards 2016 and 2017. We still prefer most among Super-Majors."

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Separately, TheStreet Ratings team rates CHEVRON CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate CHEVRON CORP (CVX) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CVX's debt-to-equity ratio is very low at 0.15 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.02, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has increased to $8,417.00 million or 47.30% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 18.80%.
  • CVX, with its decline in revenue, slightly underperformed the industry average of 1.5%. Since the same quarter one year prior, revenues slightly dropped by 6.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • In its most recent trading session, CVX has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: CVX Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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