Why Did Goldman Sachs Downgrade Chevron, Despite 'Consistent Performance Track Record'?

Although Chevron Corporation CVX has a consistent performance track record, its stock currently trades at a premium to peers, according to Goldman Sachs.

The Chevron Analyst: Neil Mehta downgraded the rating for Chevron from Buy to Neutral, while reducing its price target from $117 to $113.

The Chevron Thesis: The company’s stock has been outperforming versus global majors since 2016, Mehta said in the downgrade note.

“We continue to have a positive view of the balance sheet, dividend sustainability, growth outlook in the Permian, and free cash flow from the Australia LNG assets,” the analyst wrote.

He noted, however, that there seems to be more upside to the stocks of Exxon Mobil Corporation XOM, due to prospects of “a better long-term earnings revision story around Chemicals and costs,” and ConocoPhillips COP, “where we see higher returns on capital employed and free cash flow generation, particularly following the recent Concho acquisition.”

“While not in our base case, we recognize the Tengiz project in Kazakhstan still faces potential upward pressure from construction cost,” Mehta wrote.

CVX Price Action: Shares of Chevron had risen by 0.19% to $104.71 at the time of publication Tuesday morning.

(Photo: Chevron)