Results from Chevron's & Exxon's earnings reports reflect not just higher margins from higher energy prices, but significant increase in production as US energy producers begin to take market share from other oil producers (e.g. Russia). These reports add weight to the industrial growth story that has been shaping up so far this week.
HOWEVER, will this result in higher stock prices in the near term? Maybe not.
Firstly, the energy sector could always suffer the “sell the news” effect, just like any other industry can, and everyone was expecting great results from earnings reports.
Secondly, the possibility of the still-overvalued tech sector/mega caps dragging down the broader indexes can always lead to investors dumping their index ETF positions, which of course drags everything down with it.
On the other hand, everyone who wanted to avoid a correction might already be out of the market. In any case, any near term broad-market selloff should be a good buying opportunity for anyone who wanted to get into industrial stocks, but feels they missed the boat.
Grew earnings and cash flow from operating activities to $19.7 billion (U.S. GAAP) and $24.4 billion, respectively, as strong volume performance, including record refining volumes, rigorous cost control and higher natural gas realizations more than offset lower crude realizations, and weaker industry refining margins. Achieved best-ever quarterly refining throughput in North America and highest globally since 2008. Delivered strong quarterly oil and gas production, including record Permian production of nearly 560,000 oil-equivalent barrels per day to better serve demand; year-on-year, total production increased 50,000 oil-equivalent barrels per day. Signed largest-of-its-kind commercial agreement to capture and permanently store up to 2 million metric tons of CO2 emissions per year. Declared fourth-quarter dividend of $0.91 per share, an increase of $0.03 per share; paying out $15 billion in aggregate for the year
Shares of Chevron Corp. CVX, +0.46% rallied 2.4% toward a record high in premarket trading Friday, after the oil and gas giant reported third-quarter profit, revenue and free cash flow beat expectations by wide margins, as total oil-equivalent production from U.S. upstream operations increased by nearly 50,000 barrels per day. Net income jumped to $11.23 billion, or $5.78 a share, from $6.11 billion, or $3.19 a share, in the year ago period. Excluding nonrecurring items, adjusted earnings per share of $5.56 beat the FactSet consensus of $4.89. Total revenue hiked up 49.1% to $66.64 billion, well above the FactSet consensus of $57.36 billion. Total costs rose less than revenue, up 41.4% to $51.84 billion. Net per-day oil-equivalent production in its U.S. Upstream operations rose 49,000 to 1.18 million barrels, but was down 56,000 barrels to 1.85 million barrels for International Upstream. Free cash flow fell to $12.3 billion from $29.0 billion, but beat the FactSet consensus of $9.97 billion. The stock has run up 18.3% over the past three months through Thursday, while the SPDR Energy Select Sector ETF XLE, +0.36% has climbed 18.3% and the Dow Jones Industrial Average DJIA, +0.61% has slipped 1.5%.
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