Several companies have announced buybacks this earnings season, increasing their share repurchase programs. The most notable companies implementing lucrative buybacks are oill and gas giant Chevron CVX and big tobacco producer Altria MO.
Let’s see if it’s time to buy Chevron or Altria stock following their fourth-quarter earnings reports.
Chevron Q4 Review
Despite slightly missing Q4 earnings expectations last week by -1.68% with EPS of $4.09, Chevron rounded out its fiscal 2022 with a record year for earnings and U.S. oil and gas production. Chevron was able to beat top-line estimates by 8% at $56.47 billion during Q4. Year over year, Q4 earnings were up 60% with sales rising 17% from the prior-year quarter.
Chevron ended FY22 with a record profit of $36.54 billion. Earnings were at $18.83 per share in FY22, up a very impressive 131% from EPS of $8.13 in 2021 as crude oil prices have remained relatively high. Total sales for FY22 were $246.25 billion, climbing 51% from 2021 sales of $162.46 billion.
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Altria Q4 Review
Altria reported Q4 earnings on Wednesday and was able to reach bottom-line expectations with earnings of $1.18 per share. Fourth-quarter sales slightly missed estimates by -1.57% coming in at $5.08 billion. Year over year, Q4 EPS was up 8% with sales virtually flat from the prior-year quarter.
Total sales for FY22 came to roughly $20.69 billion, declining -20% compared to $26.01 billion a year ago. Still, Altria ended FY22 with earnings at $4.84 per share which represented 5% growth from EPS of $4.61 in 2021.
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Dividend Aristocrat & Buybacks
Last Thursday, shares of Chevron spiked on news that the company will increase its budget for buybacks to $75 billion upon robust profits. This now tops fellow big oil conglomerate Exxon Mobil’s XOM $50 billion share repurchase plan through 2024.
Chevron also announced it will increase its quarterly dividend amount by 6% ($0.09) to $1.51 per share with its annual yield currently at 3.32%, which is now above Exxon Mobil’s 3.17% with the industry average also at 3.17% and the S&P 500 average at 1.5%. Even better, Chevron is a dividend aristocrat recognized for raising its dividend for at least 25 consecutive years, currently at 35 years and counting.
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Dividend King & Buybacks
As for Altria, it is even further among the upper echelon as it relates to dividends. Altria is considered a “Dividend King” which is recognition for a company increasing its dividend for at least 50 consecutive years. Altria is currently at 53 years and counting in this regard.
During its Q4 report, management stated it is committed to the long-term objective of a dividend payout ratio target of approximately 80% of adjusted diluted future EPS. Management also announced a $1 billion share buyback plan which led to Altria stock popping 5% on Wednesday.
More impressive, Altria has frequently topped the Dividend King list in terms of yield which is currently at 7.91%, crushing the Tobacco Industry average of 4.90% and far above the benchmark.
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Performance & Valuation
Over the last year, when including the dividends, Chevron’s total return is +30% Vs. Altria’s virtually flat performance with both topping the S&P 500’s -8%. However, over the last decade, Chevron’s +46% and Altria’s +35% total return have trailed the benchmark’s +177%.
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Even so, Chevron and Altria’s reliable dividends make them viable investments for steady income and is reassuring to investors with their stocks recently outperforming the broader market.
Both stocks also continue to trade attractively from a valuation standpoint. Trading around $169 per share and just 10.9X forward earnings, Chevron trades well below its extreme decade high and at a 38% discount to the median of 17.6X.
Looking at Altria, shares trade around $47 at 9.3X forward earnings. This is 60% below its own decade-long high of 23.5X and a 35% discount to the median of 14.5X.
EPS Growth & Outlook
After rounding out fiscal 2022, Chevron’s FY23 earnings are expected to drop -16% to $15.76 per share after a very exceptional year. Fiscal 2024 earnings are projected to dip another -5% but earnings estimate revisions have gone up while FY23 estimates have declined. Plus, Chevron’s bottom line would still remain well above historical levels.
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Pivoting to Altria, earnings are forecasted to be up 5% in FY23 and rise another 5% in FY24 to $5.35 per share. Earnings estimates have remained slightly higher over the last quarter. Furthermore, with management committed to an 80% payout ratio of future EPS, the forecast of solid bottom-line growth indicates Altria should have the ability to offer lucrative dividend hikes at some point.
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Bottom Line
Both Chevron and Altria stock currently land a Zacks Rank #3 (Hold). After largely outperforming the broader market over the course of the last six months both stocks may be due for a pullback but remain very reliable investments in terms of income in the portfolio. Increasing their share repurchase plans is also a great sign for long-term investors as management at both companies appear to be focused on rewarding shareholders as indicated in the buybacks and stellar dividends.
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