You knew big numbers were coming.
On Wednesday, energy giant and Sarge fave Chevron Corp. (CVX) announced a 6.3% dividend increase and a new authorization for a $75B share repurchase program that will go into effect on April 1st after the current $25B authorization expires.
Chevron released its fourth-quarter financial results on Friday morning. What a quarter! What a year! Still, there was some disappointment.
For the three months ended December 31, Chevron posted adjusted EPS of $4.09 (GAAP EPS: $3.33) on revenue of $56.473B. The adjusted earnings print fell short of consensus as the firm wrote off $1.1B in international upstream write-off and impairment charges. The revenue print was good enough for year over year growth of 17.3%.
Even so, net income of $6.353B increased 25.7% from the year ago comp. For the full year 2022, Chevron posted net income of $35.465B, a number that easily beat the firm's former record year of 2011, and was up 127% from full year 2021.
Income Breakdown
Upstream drove profits of $5.485B for Q4 2022 (+6.4%), and $30.284B for FY 2022 (+91.5%).
- US Upstream posted Q4 earnings of $2.618B (-11.9%).
- International Upstream posted Q4 earnings of $2.867B (+31.2%)
Downstream drove profits of $1.771B for Q4 2022 (+133%), and $8.155B for FY 2022 (+179.9%).
- US Downstream posted Q4 earnings of $1.18B (+78.8%).
- International Downstream posted Q4 earnings of $591M (+491%).
- Other operations drove income/loss of $-903M for Q4 and $-2.974B for FY 2022.
- Exchange rates acted as a $-405M headwind for Q4 2022, but a $669M tailwind for FY 2022.
Fundamentals
Operating cash flow amounted to $12.5B for the quarter and $49.6B for the year, which was a firm record. Draw from that Q4 capital expenditures of $3.8B and FY 2022 capital expenditures of $8.1B, and we get to free cash flow of $8.7B for the quarter and $37.6B for the full year, which is also a record. This is also why the firm is rushing to return more cash to shareholders.
Turning to what balance sheet information is available as I do not yet see a Form 10-Q for the quarter just yet, and Chevron has filed that form days after releasing their quarterly press release in the past, the firm ended the period reported with a net cash position of $17.901B, bringing total assets to $237.709B (+7.6%), as total debt has been decreased to $23.339B (-25.6%). It is difficult to assess the firm's balance sheet without the ability to figure out my ratios, but with what I do have, cash up, debt down... seems like a good start.
My Thoughts
Chevron is crushing it.
I see the stock giving back almost 3% this morning after gaining almost 5% on Thursday. Much of this is likely profit-taking as record earnings, record operating cash flow and record free cash flow don't leave many other reasons to exit the stock. Unless one thinks that the Biden administration will try to get in the way of profitability in this space as they have done before.
I see it this way. This is one of my more successful positions. In fact, outside of my defense contractors, it would be number two.
Am I taking profits today? I don't think so. I do think I see a recession coming and I do not expect big oil to do well in a recession. That said, the time is just not right yet.
Readers will see that CVX broke out of a double bottom with a $166 pivot back in October. Since then, as the shares have consolidated, they have built an ascending triangle, which is a bullish pattern of continuance with a $189 pivot that came close to being tested. Relative strength is fine.
The daily Moving Average Convergence Divergence (MACD) is in decent enough shape. My plan is to add down to the 21-day EMA (exponential moving average) ($178). Given another run at pivot, my target price is $217, which may be a Wall Street high.
I do see UBS five-star analyst Jon Rigby and Raymond James five-star analyst Justin Jenkins, who both have $215 target prices, so at least I know that I am in pretty good company.
