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Bank Of America And Deutsche Bank Disagree On Chevron

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Two Wall Street firms had very different views of Chevron Corporation (NYSE: CVX) following meetings with the company's management.

Deutsche Bank

Deutsche Bank analyst Ryan Todd maintained a Buy rating and $120 price target on the stock. Todd commented that there were "signs of encouragement" following the meeting.

"Near-term cash burn remains challenging optically, and as with Exxon Mobil, the post-2018 outlook remains somewhat uncertain, but we view CVX as relatively attractive amongst mega-caps, whose coming volume and cash flow inflection point is well positioned for a gradual recovery in crude." according to Todd.

Todd noted that 2017 capex projections were lowered from $40 billion to $30 billion with no change to the 2017 production target of 3.1 million b/d.

In a base case scenario, Deutsche Bank expected $75/bbl WTI in 2017 with CVX generating a 4.7 percent FCF yield versus a 3.5 percent yield at Exxon Mobil.

Any upside to the outlook for crude could support a "meaningful share repurchase" with each $5/bbl increase in crude prices resulting in $2.35 billion of additional FCF, according to Todd.

Bank Of America

At Bank of America, analysts led by Doug Leggate came away with a different impression.

Leggate felt that "in a strip environment there is little absolute value offered by Chevron at current levels."

Bank of America also focused on cash-burn and noted that it was reduced to approximately $18 billion through 2017, however, the offsets from lower capex demonstrated a margin improvement outcome that was "no different than presented in 2014 – and in fact, stands slightly below" the firm's "previous estimates for the post 2017 portfolio," according to Leggate.

The analyst note indicated that under the firm's current assumptions, which included an approximate 20 percent reduction in assumed costs, CVX was fairly valued at $101.

Leggate concluded that "perhaps a greater issue for CVX specifically, is the challenge to resource integrity given that including the contributions of the giant LNG developments – now essentially headed for completion on a 2 year time line – reserve replacement in the past decade has been less than 100 percent! What will this look like at $70 oil without similar large scale developments to fall back on?"

Bank of America maintained an Underperform rating and cut the price target from $105 to $101 on the stock.

Chevron recently traded at $103.14, up 0.22 percent.

Latest Ratings for CVX

DateFirmActionFromTo
Apr 2021Raymond JamesMaintainsOutperform
Apr 2021Goldman SachsDowngradesBuyNeutral
Mar 2021Evercore ISI GroupMaintainsOutperform

View More Analyst Ratings for CVX
View the Latest Analyst Ratings

 

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Posted-In: Bank of America Deutsche Bank Doug Leggate Ryan ToddAnalyst Color Price Target Analyst Ratings

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