Exxon, Chevron Report Q2 Earnings: BofA's Takeaways

Chevron Corp. CVX and ExxonMobil Corp. XOM reported second-quarter earnings Friday. Here's what Bank of America analysts took away from the oil companies' earnings. 

The Oil Stock Analyst: Analyst Doug Leggate reiterated a Buy rating on Chevron and increased the price target from $125 to $130.

Leggate reiterated a Buy rating on Exxon with a $90 price target.

The Chevron Takeaways: Chevron reported second-quarter EPS of $1.71, beating consensus and Bank of America expectations by 11 and 31 cents, respectively.

Chevron's acquisition of Noble Energy was the highlight of the call, given that the acquisition has bolstered upstream operating leverage, Leggate said in a note. 

This higher upstream leverage is beneficial to the company for three reasons, the analyst said. The royalty interest Chevon holds across production in the Permian Basin amid an oil price recovery is one reason, he said. 

Secondly, the Noble acquisition is accelerating synergies at $600 million ahead of schedule on an annualized rate, Leggate said. 

Lastly, cost efficiency efforts spanning Chevron's portfolio are improving margin gains relative to revenue, the analyst said.

Chevon's commitment to capital discipline, strong dividend, oil leverage and healthy balance sheet remain key drivers for investment, he said. 

The Exxon Takeaways: Exxon reported second-quarter EPS of $1.10, beating consensus and Bank of America expectations by 13 and 7 cents, respectively.

Exxon delivered its highest quarterly FCF in a decade, all while funding growth across its three business lines, Leggate said in a note. 

The company distributed $3.7 billion in dividends and paid off $3.2 billion in debt, said the analyst.

Exxon's earnings beat was dominated by its chemicals line, yet the beat appears to be discounted by the market, said Leggate.

Seventy-five percent of Exxon's refineries are integrated with the chemicals business, despite it being a separate revenue line item, he said. 

Maintenance costs materially impacted the company's earnings by 18 cents, a figure management expects to be cut in half for the third quarter, said Leggate.

The bottom line of Exxon's earnings is the company's earnings capacity is "significantly better" and should be realized in future quarters, said Leggate.

Exxon remains Leggate's top major oil pick.

CVX, XOM Price Action: Chevron was up 0.62% to $102.44 at last check Monday. Exxon was up 0.82% to $58.03.

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