• Chevron stock has added 18.20% in the year-to-date analysis. 
  • Chevron’s partnership with Toyota and Cummins will improve upstream margins. 
  • CVX was ordered to conduct 5-year modifications to its California plant and reengineer its fluid-catalytic cracking units (FCCUs) that manufacture gasoline. 

Chevron Corporation (CVX) added 3.41% on July 21, 2021, from the previous day, closing at a high of $99.82. CVX post-market price as of 7:41 GMT was $99.90 (+0.08%). Q2 2021 earnings report is on July 30, 2021, with positive market estimates engulfing the giant energy company. 

The stock has added 18.20% in the year-to-date analysis after consensus estimates revised earnings-per-share (EPS) upwards by 72.22%. It stood at $0.90 in Q1 2021 and is expected to hit $1.57 by Q2 2021. Revenue is also expected to increase 12.33% to $35.98 billion to $32.33 billion. However, CVX’s market capitalization is still 27.29% at $186.12 billion below integrated oil & gas market leader Exxon Mobil (XOM) that sits at $236.91 billion. 

Strong cash flow

Chevron is expected to continue with its strong cash flow into Q2 2021. The net change in cash in Q1 2021 increased to $1.527 billion from a decline of $1.054 in Q4 2019. It was caused by high downstream margins from fuel and lubricant sales. In FY 2019/20 sale of lubricants in Australia slowed 0.96% to 329.4 megalitres from 332.6 megaliters in the previous financial year. 

Lubricant sale in Australia

Lubricant sale in Australia

Oil supply disruptions added to the high oil price change making crude oil hit a 3-year high past $76 per barrel in Q2 2021. Further, Chevron’s partnership with Toyota will improve downstream/ upstream margins as the two companies will concentrate on developing fuel-cell technology and hydrogen integration. Q1 2021 saw Toyota’s revenue double Chevron’s at $71.11 billion (+8.87% YoY) and annual revenue at $255.817 billion. 

Business development

To increase the business development under the fuel-cell/ hydrogen technology, Chevron proceeded to sign another memorandum of understanding (MoU) with Cummins. It was about time the two companies partnered with Cummins as a leading engine developer and market leader in manufacturing power products. Full-year revenue projections for 2021 are expected to increase by 8%-12%, with EBITDA at 15-15.5% of the company sales.  

In what could lower its California oil production, environmental regulators directed Chevron to reduce its particulate pollution.  

Chevron’s California, Richmond Plant

Chevron’s California, Richmond Plant

The 5-year modifications are expected to be costly as they entail the reengineering of the fluid-catalytic cracking units (FCCUs) that manufacture gasoline. Expenditures attached to this upgrade may run to billions or force a shutdown leading to layoffs. 

Dividend

Investors will take note of Chevron’s quarterly dividend cycle with a forward yield of 5.37%. The annual payout stands at $5.36, with a total payout ratio of 87.03%. As of Q1 2021, CVX announced a quarterly dividend of $1.37 at a 5-year growth rate of 4.01%. Chevron’s board had approved an increase of $0.05/ share to the dividend, showing the company had consistently increased dividend payout for a consecutive 34 years. 

CVX Dividend yield against S&P 500

CVX Dividend yield against S&P 500

For the last three years, the dividend yield has grown 44.91% against the S&P 500 price level at 55.57%. 

Technical analysis

Chevron Corporation (CVX) stock hit resistance at $112, while two strong pullbacks found the next resistance level at $109.82. The first notable pullback that rose slightly above $109 was from April 27, 2021, to May 11, 2021. The second pullback lasted from June 1, 2021, to June 17, 2021.    

Chevron Corporation (CVX) stock chart

Volume is rising on the buyers’ side, despite the price falling below the 9-day EMA. The 14-day RSI shows an increase in buying momentum just above the oversold region at 37.99. Failure of the uptrend to recover above $100.0 may push the stock below $96.00.