On Monday, BofA Securities updated its stance on Chevron (NYSE:CVX), increasing the price target from $168.00 to $180.00 and maintaining a Buy rating on the stock. Currently trading at $155.24 with a market capitalization of $279 billion, Chevron has caught analysts' attention. The adjustment comes after a review of the company's potential cash flow increase due to upcoming projects.
According to InvestingPro data, 8 analysts have recently revised their earnings estimates upward for the upcoming period.
The analyst at BofA Securities highlighted Chevron's expected cash flow growth, driven by the Gulf of Mexico, Tengizchevroil (TCO), and CP Chem projects. These initiatives are anticipated to contribute an additional $5.5 billion in free cash flow (FCF) to Chevron over the next two to three years, a development that has not been fully appreciated by investors due to concerns over the Hess Corporation (NYSE:HES) uncertainty.
InvestingPro analysis shows Chevron's strong financial position, with sufficient cash flows to cover interest payments and a moderate debt level. The company also boasts an impressive 37-year streak of consecutive dividend increases, currently yielding 4.2%.
Despite some investor feedback suggesting hesitation to invest in Chevron until the Hess situation is resolved, BofA Securities remains optimistic. The firm acknowledges the potential risk Hess poses to Chevron's production outlook by 2030 but considers the long-term nature of the scenario, with possibilities for oil market cycles and acquisition opportunities to mitigate the risk.
Moreover, BofA Securities posits that a favorable outcome for Chevron in the Hess arbitration, scheduled for the second quarter of 2025, could significantly boost the stock as it would remove the current overhang. Conversely, a loss might only result in a slight decline in share price, with recovery expected once Chevron clarifies its alternative strategy.
BofA Securities expresses confidence in recommending Chevron shares at the current price, considering the robustness of the company's existing portfolio, even excluding the Hess asset. InvestingPro's Fair Value analysis suggests the stock is currently undervalued, with multiple additional ProTips and comprehensive financial metrics available to subscribers through the platform's detailed Pro Research Report, which offers deep-dive analysis of Chevron among 1,400+ top US stocks.
In other recent news, Chevron Corporation (NYSE:CVX) has seen several noteworthy developments. Truist Securities has increased its price target for Chevron to $160, maintaining a Hold rating, based on expectations of improved capital efficiency.
Furthermore, Chevron has announced a reduction in its capital expenditure budget for 2025, focusing on financial discipline and cash flow growth. The energy giant's capital expenditure plan for 2025 indicates a shift towards prioritizing financial returns over production growth, with spending in the Permian Basin set to decrease.
Citi reaffirmed its Buy rating on Chevron, emphasizing the potential of Chevron's upcoming exploration activities in Namibia. Chevron's stock also retained an Overweight rating from Piper Sandler, despite ongoing arbitration related to its acquisition of Noble Energy (NASDAQ:NBL). This rating reflects optimism about Chevron's strong portfolio momentum and attractive valuation compared to its peers.
In terms of earnings, Chevron reported Q3 2024 profits of $4.5 billion or $2.48 per share, a result of a 7% increase in global production.
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