NEW YORK (TheStreet) -- Shares of Chevron Corp. (CVX) are lower by 1.01% to $124.93 in mid-afternoon trading on Tuesday, following a ratings downgrade to "underperform" from "neutral" at Bank of America (BAC) .
The firm said it reduced its rating on the petroleum company as it believes the company is facing a "more challenging outlook for free cash flow, given current net cash outflow which looks to remain above $50 billion."
"While planned disposals suggested by management could top ~$10 billion our analysis suggests that Chevron will build material debt over the next four years, consistent with the ~$12 billion annual run rate evident over the past year," the firm continued.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
Bank of America cut its price target on Chevron to $133 from $135.
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 revenue growth, attractive valuation levels, largely solid financial position with reasonable debt levels by most measures, increase in net income and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- CVX's revenue growth has slightly outpaced the industry average of 3.5%. Since the same quarter one year prior, revenues slightly increased by 0.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Oil, Gas & Consumable Fuels industry average. The net income increased by 5.6% when compared to the same quarter one year prior, going from $5,365.00 million to $5,665.00 million.
- 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. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.99 is somewhat weak and could be cause for future problems.
- 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
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