CVX – Market expectations are for Uniform ROA to expand, but management may have concerns about demand levels, oil production, and costs

June 2, 2022

  • Chevron Corporation (CVX) currently trades near corporate yet above historical averages relative to Uniform earnings, with a 24.3x Uniform P/E (Fwd. V/E’).
  • At these levels, markets are pricing in expectations for Uniform ROA to expand to 6%, accompanied by 3% Uniform asset growth going forward.

  • However, analysts expect Uniform ROA to improve to only 5% by 2023, accompanied by 1% Uniform asset shrinkage.

  • If sustained going forward, these levels would imply a stock price closer to $105, representing approximately 41% equity downside for the firm.

  • Moreover, the firm’s most recent earnings call suggests management may have concerns about demand levels, oil production, and costs.

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