Friday, July 10, 2009

Chevron Get The Bad News Out Early

The company isn't about to release its 2Q '09 earnings, but it did take the time to warn about what it will release when its time comes. Its 1Q '09 earnings, at 92 cents, are 63% lower than 1Q '08's. Cash flow from operations fell by an even greater percentage in the same timeframe: -70%. For the first quarter of this year, operations cash flow minus capital expenditures (free cash flow) was negative. From 2005 to 2008, except for 2007, free cash flow was above $10 billion for each year.

Hence Chevron's presence in the Low P/E Bin; it's P/E is 6.08 and its yield is 4.23%. The analyst quoted in the above-linked AP story, who cut his 2Q '09 estimate to 99 cents from $1.34, says that he still sees Chevron as the best of the integrated-oils lot.

In its favour, Chevron has the second-largest 10-year growth in continuing-operations earnings per share of all integrated-oil Bin stocks, and a 10-year return on equity of well over 20%. As calculated by logarithmic regression, its 10Yr COEPS growth is 27.57% per year. If that superiority is due to a Chevron moat, it should be piling up the EPS growth once oil and related petroleum products come back...if they come back.

In addition to foreign currency losses, Chevron cited bad refining margins for the warning. More reason, evidently, for fellow Bin'ers Holly Corp. and Tesoro Corp. to stay down.

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