Chevron stock rating reiterated at Buy by UBS on strong free cash flow

Investing.com - UBS has reiterated its Buy rating on Chevron (NYSE:CVX) with a price target of $197.00, citing the company’s potential for strong free cash flow growth over the next five years. The target aligns with broader Wall Street sentiment, as analysts have set targets ranging from $124 to $204, with InvestingPro data showing Chevron is currently trading below its Fair Value, suggesting potential upside for investors.

UBS analyst Manav Gupta noted that Chevron is positioned to grow adjusted free cash flow by an average of 10% annually through 2030 at a nominal $70 Brent price, a factor the firm believes remains underappreciated by the market. This growth potential is supported by Chevron’s strong financial foundation, with the company generating $15.4 billion in levered free cash flow over the last twelve months and maintaining a healthy 5% free cash flow yield.

While upstream operations will drive most of the cash flow generation, with Guyana and Gulf of Mexico providing volume growth, UBS expects downstream operations to make meaningful contributions through above mid-cycle refining margins and free cash flow improvements at CPChem as new projects come online. Chevron’s operational efficiency is reflected in its robust 40.6% gross profit margin and solid EBITDA of $37.7 billion over the last twelve months.

Between 2026-2030, UBS projects Chevron will generate $153.3 billion in free cash flow and $80.3 billion in post-dividend free cash flow, representing 27% of the company’s current market capitalization. This cash flow strength supports Chevron’s impressive dividend track record, with InvestingPro data revealing the company has raised its dividend for 38 consecutive years and maintained payments for 55 years, currently yielding an attractive 4.5%. Discover 8 more exclusive insights and comprehensive analysis in Chevron’s Pro Research Report, available to subscribers.

The firm also highlighted Chevron’s increased synergy target related to the Hess acquisition, which was recently raised by 50% with full realization expected by year-end 2026, and noted that early entry into scalable gas-fired power generation offers upside potential not currently reflected in consensus estimates. With moderate debt levels and an Altman Z-Score of 3.09 indicating financial stability, Chevron appears well-positioned to execute its growth strategy while maintaining its status as a prominent player in the Oil, Gas & Consumable Fuels industry.

In other recent news, TotalEnergies has agreed to sell a 40% stake in two offshore Nigerian petroleum prospecting licenses to Chevron. The licenses cover approximately 2,000 square kilometers in Nigeria’s West Delta basin. Meanwhile, Moody’s Ratings has affirmed Chevron Phillips Chemical Company LLC’s A2 long-term issuer rating but changed its outlook to negative. This change reflects concerns about the joint venture’s financial policy and potential increases in balance sheet debt.

UBS has reiterated its Buy rating on Chevron, setting a price target of $197, following the company’s 2025 Investor Day. RBC Capital also maintained its Outperform rating with a $175 price target, noting Chevron’s strategic adjustments. However, Piper Sandler slightly lowered its price target for Chevron to $168, while maintaining an Overweight rating. This adjustment came after Chevron announced a $1.0 billion reduction in capital expenditure guidance and year-end 2026 cost savings targets, alongside a $500 million increase in Hess synergies. These developments highlight Chevron’s ongoing strategic planning and financial adjustments.

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