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Integrated oil major Chevron CVX had a pleasant surprise in store for investors when it reported both quarterly and full-year results on Friday. The company reported a comprehensive beat in the fourth quarter of 2018 on the back of higher revenues, record production and strong oil price realizations. Significantly lower net charges due to the absence of a tax outgo of $2.47 billion also aided overall results.
Chevron reported earnings per share of $2.06, surpassing the Zacks Consensus Estimate of $1.87 and also significantly improving from the year-ago profit of 73 cents. Quarterly revenues of $42.3 billion also beat the Zacks Consensus Estimate of $41.6 billion and were up 12.5% year over year.
While the numbers explain the stock's impressive performance (up more than 4%) following its earnings release, we take a closer look at the results to gain further insight. Here are five key things you need to know from Chevron's earnings update.
Profit Jumps, as Upstream Earnings Rise: Chevron saw its profit soar from $9.2 billion in 2017 to $14.8 billion last year. In particular, the company reported $13.3 billion of earnings from its upstream business, compared with $8.2 billion in the previous year.
Maintains Dividend Streak: Chevron maintained its dividend growth streak, marking the 32nd consecutive year of payout hike. The company hiked its dividend by 7 cents per share, giving investors another reason to cheer. Chevron declared a dividend of $1.19 per share, payable on Mar 11, 2019 to its shareholders as of Feb 15, 2019.
Growing Free Cash Flow & Dividend Safety: Chevron’s free cash flow has gone up significantly. In 2018, the company generated $30.6 billion of cash from operating activities while shelling out $13.8 billion on capital expenditures for record free cash flow of $16.8 billion. During the same period, Chevron paid out $8.5 billion as cash dividends to its shareholders. In other words, the company’s dividend appears safe for the foreseeable future.
Using $4.76 as the dividends to be received in the next 12 months (after taking into consideration the recent hike) and based on 1.91 billion diluted shares outstanding, the total payout comes to a little over $9 billion annually, much lower than the free cash flow.
Debt Down: Chevron's total debt is currently around $34.5 billion, down from $38.8 billion a year ago. Importantly, the company's year-end debt ratio was 18%, improving from 20.7% at year-end 2017.
Impressive Production Growth, Led by Permian: Production at Chevron, the nation's largest oil and gas producer, remains strong. The company said its 2018 production was 2,930 thousand oil-equivalent barrels per day (MBOE/d), up 7.4% from a year ago and up 13% over the 2017 output.