Chevron Corporation CVX has had a good year so far, hitting a 52-week high of $168.96 on March 26. The stock has climbed 16.3% year to date, outperforming rival ExxonMobil’s XOM 10.6% gain. This impressive run has been driven by strong production growth, attractive shareholder returns and a competitive valuation. However, headwinds such as legal hurdles surrounding its Hess Corporation HES acquisition, asset sale risks and Venezuela challenges raise the question: Has Chevron’s stock run its course, or is there still upside left?
Zacks Investment Research
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Chevron’s Strong Free Cash Flow and Financial Discipline
Chevron is well-run and historically a profitable big oil giant. Investors should know that the company returned $27 billion to shareholders in 2024 through dividends and stock buybacks. CVX has been quite active in repurchasing shares, and management plans to buy back $10 billion to $20 billion in shares annually, reducing the share count by 3-6% each year. With capital expenditures set at a manageable $15 billion through 2026, Chevron appears well-positioned to sustain strong shareholder returns.
Chevron Corporation
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Chevron continues to be a strong dividend player, having increased its payout for 37 consecutive years. The latest dividend hike of 4.9% takes its yield to over 4%, making it a reliable income source for long-term investors.
CVX’s Output & Natural Gas Growth
Chevron’s upstream portfolio remains a key strength, with strong production growth from the Permian Basin and Kazakhstan. The company is targeting a 6% annual production increase through 2026, with high-margin projects driving long-term value. The Tengizchevroil (TCO) expansion in Kazakhstan and increased efficiency in the Permian are expected to bolster output, supporting Chevron’s long-term earnings growth.
Chevron stands to benefit from U.S. energy policy shifts that support domestic oil and gas production. The Trump administration has prioritized energy security, creating a favorable backdrop for increased drilling. Additionally, rising energy demand from AI-driven data centers is expected to boost natural gas consumption, strengthening Chevron’s revenue potential.
A Word on Chevron’s Valuation
In addition to these tailwinds, Chevron’s valuation appears reasonable. It is trading at a multiple of 6.99 based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization). This compares favorably to ExxonMobil. For value-focused investors, this could be a catalyst.
Zacks Investment Research
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The Hess Conundrum: A Potential Game Changer or a Liability?
Chevron’s $53 billion all-stock acquisition of Hess Corporation is meant to be a strategic coup, granting a 30% stake in Guyana’s Stabroek block, one of the world’s most prolific offshore oil fields. If approved, the deal could boost production and lower breakeven costs. However, arbitration challenges from ExxonMobil and China’s CNOOC threaten the deal’s success.
Chevron Faces Venezuela Sanctions
Chevron faces geopolitical uncertainty, particularly regarding its operations in Venezuela. The company recently got the U.S. government’s deadline extension by at least 30 days to wrap up its operations with Venezuela’s state-owned energy major, Petroleos de Venezuela SA, after the Trump administration had issued a short 30-day wind-down deadline in early March to pressure President Nicolas Maduro’s autocratic regime and make necessary reforms. The revoking of the company’s license to operate in Venezuela could potentially lead to a revenue loss of $150 million to $200 million per month.
Asset Divestiture Challenges, Refining Woes
Chevron has leaned on asset sales to maintain high shareholder returns. In 2024, the company generated $7.7 billion from divestitures, with plans to sell $10-$15 billion worth of assets through 2028. Agreed, these sales strengthen cash flow, but long-term sustainability remains a concern. If Chevron is unsuccessful in compensating sold assets with equally profitable investments, it might not be able to carry out its aggressive buybacks, while dividends might take a hit.
By now, it’s quite clear that Chevron’s downstream business is under pressure. The segment’s dismal performance was the primary reason why the company missed Q4 earnings expectations, with EPS at $2.06, falling short by 14 cents. While revenues climbed 10.7% year over year to $52.2 billion, weak refining and chemical margins remain an overhang. Even Chevron’s adjusted upstream earnings declined due to asset retirement obligations and inventory valuation effects.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Market Volatility & Regulatory Uncertainty
Chevron also faces broader market volatility. Over the past seven days, the Zacks Consensus Estimate for CVX’s 2025 earnings has moved down, reflecting concerns about potential demand destruction linked to the Trump administration's plan for reciprocal tariffs. Regulatory risks in key regions such as the U.S. Gulf of Mexico and Kazakhstan could also impact future cash flow. As it is, Chevron’s earnings are highly sensitive to oil price fluctuations. The company’s forecast for $10 billion in free cash flow growth by 2026 assumes Brent crude prices at $70 per barrel. If oil drops below that level, this figure would shrink, limiting Chevron’s financial flexibility.
Zacks Investment Research
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Conclusion: Hold Chevron for Now
We like Chevron’s strong free cash flow, shareholder-friendly policies, and production growth. However, geopolitical risks, falling earnings estimates and uncertainty surrounding the Hess acquisition warrant caution. Given the confluence of positive and negative factors, CVX appears fairly valued at current levels, making it a Zacks Rank #3 (Hold) for now. Investors are advised to wait for a pullback or greater clarity on the Hess deal for a better entry point to add new positions.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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