Exchange: NYSE | Sector: Energy | Industry: Oil Gas Integrated
Q2 2024
Published: Aug 7, 2024
Earnings Highlights
Revenue of $49.57B up 5% year-over-year
EPS of $2.42 decreased by 24.5% from previous year
Gross margin of 29.7%
Net income of 4.43B
""Over the past two years we’ve returned over $50 billion to shareholders, approximately 18% of our market cap." - Michael K. Wirth, CEO" - Michael K. Wirth
Chevron Corporation (CVX) Q2 2024 Financial Results: Strong Production Growth and Strategic Advancements in a Challenging Market
Executive Summary
Chevron Corporation reported a solid net income of $4.4 billion or $2.43 per share for Q2 2024, driven by over 11% production growth year-over-year. This quarter saw significant contributions from the Permian Basin and Gulf of Mexico due to operational efficiencies and strategic advancements, including the ongoing merger with Hess and expansion in renewable energy initiatives. While revenue increased by nearly 5% year-over-year to $49.6 billion, the company faced operational downtime that reduced expected earnings. Chevron maintained a strong focus on returning capital to shareholders, with $6 billion allocated for dividends and share repurchases, a consistent strategy that has returned over $50 billion to shareholders in the last two years. Overall, despite facing headwinds in the upstream segment, Chevron exhibits resilience with robust plans for future growth and production capacity enhancements.
Key Performance Indicators
Revenue
49.57B
QoQ: 6.43% | YoY:4.99%
Gross Profit
14.70B
29.66% margin
QoQ: -0.31% | YoY:-0.05%
Operating Income
5.59B
QoQ: -6.08% | YoY:-11.49%
Net Income
4.43B
QoQ: -19.40% | YoY:-26.22%
EPS
2.43
QoQ: -18.73% | YoY:-24.53%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $49.57 billion (up 4.99% YoY, up 6.43% QoQ)
Gross Profit: $14.7 billion (flat YoY, down 0.05% QoQ)
Operating Income: $5.59 billion (down 11.49% YoY, down 6.08% QoQ)
Net Income: $4.43 billion (down 26.22% YoY, down 19.40% QoQ)
EPS: $2.43 (down 24.53% YoY, down 18.73% QoQ)
Financial Highlights
Operational Performance:
- Revenue: $49.57 billion (up 4.99% YoY, up 6.43% QoQ)
- Gross Profit: $14.7 billion (flat YoY, down 0.05% QoQ)
- Operating Income: $5.59 billion (down 11.49% YoY, down 6.08% QoQ)
- Net Income: $4.43 billion (down 26.22% YoY, down 19.40% QoQ)
- EPS: $2.43 (down 24.53% YoY, down 18.73% QoQ)
- Total Debt: $23.18 billion
- Net Debt Ratio: 10.7%, indicative of strong balance sheet health.
Management Commentary:
During the earnings call, CEO Mike Wirth emphasized, "This quarter, Chevron delivered strong production and continued our track record of consistent shareholder returns. Production increased by more than 11% from the prior year and included a new quarterly record in the Permian."
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
49.57B
4.99%
6.43%
Gross Profit
14.70B
-0.05%
-0.31%
Operating Income
5.59B
-11.49%
-6.08%
Net Income
4.43B
-26.22%
-19.40%
EPS
2.43
-24.53%
-18.73%
Key Financial Ratios
currentRatio
1.16
grossProfitMargin
29.7%
operatingProfitMargin
11.3%
netProfitMargin
8.94%
returnOnAssets
1.7%
returnOnEquity
2.78%
debtEquityRatio
0.15
operatingCashFlowPerShare
$3.45
freeCashFlowPerShare
$1.31
dividendPayoutRatio
67.2%
priceToBookRatio
1.8
priceEarningsRatio
16.11
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Strategic Growth Initiatives:
- The merger with Hess is progressing positively, with management confident about concluding FTC reviews.
- Focus on renewing energy investments with projects like the ACES green hydrogen initiative and Geismar renewable diesel plant, expected to be operational by end of 2024.
Operational Challenges:
- Downtime in the Upstream segment impacted production realizations, although management remains optimistic about mitigating these through strategic planning and operational performance enhancements.
"Over the past two years we’ve returned over $50 billion to shareholders, approximately 18% of our market cap." - Michael K. Wirth, CEO
— Michael K. Wirth
"Our balance sheet remains one of the strongest in the industry, ending the quarter with a net debt ratio of 10.7%." - Eimear P. Bonner, CFO},
— Eimear P. Bonner
Forward Guidance
Chevron expects near-term operational hurdles with maintenance activities in Q3 2024, but projects a production growth rate of 15% for the full year. Management anticipates significant cash flow recovery as working capital builds unwind, particularly in Q4 2024. CEO Wirth stated, "We expect to see a substantial increase in cash flow and are committed to returning capital to shareholders through dividends and buybacks. We are well positioned for long-term earnings growth."
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
CVX Focus
29.66%
11.30%
2.78%
16.11%
BP
15.10%
14.90%
-0.19%
-193.14%
SHEL
16.00%
10.80%
1.90%
16.43%
PBR
50.00%
26.90%
-0.51%
-57.57%
SU
38.20%
17.80%
3.52%
10.67%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Investors should view Chevron’s strategic positioning amid operational challenges as a positive sign for long-term profitability. The company's commitment to returning cash to shareholders while pursuing growth through a diversified energy portfolio and a solid exploration strategy underscores its potential for sustainable performance. Stock performance may be influenced by quarterly production updates and developments around the ongoing Hess merger.
Key Investment Factors
Growth Potential
With significant investments in renewable energy and a robust pipeline of growth projects across the Gulf of Mexico, Permian Basin, and international ventures, Chevron is poised for substantial growth in production and earnings over the coming years.
Profitability Risk
Operational challenges linked to maintenance activities and geopolitical factors affecting overseas operations (e.g., Venezuela). Also, fluctuating oil prices can directly impact cash flow and profitability.
Financial Position
Chevron maintains a strong balance sheet with a net debt ratio of 10.7% and $6 billion in cash flow in the latest quarter, positioning the company well for enduring market volatility.
SWOT Analysis
Strengths
Robust production growth of over 11% YoY
Strong balance sheet with a net debt ratio of 10.7%
Consistent shareholder returns exceeding $50 billion in recent years
Weaknesses
Operational downtime impacting Q2 performance
Reliance on a few key projects for a significant portion of production
Opportunities
Expansion in renewable energy markets
Potential growth from the merger with Hess
New exploration opportunities in West Africa and South America
Threats
Geopolitical risks in operating regions like Venezuela
Volatility in oil prices impacting revenues and margins