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On Tuesday, HSBC analysts announced a downgrade of Chevron stock (NYSE:CVX) from a Buy to a Hold rating, accompanied by a reduction in the price target from $176.00 to $158.00. The decision follows Chevron’s recent cut in shareholder buybacks announced with their first-quarter results. According to InvestingPro data, Chevron currently trades at $141.62, with analyst targets ranging from $124 to $197. Despite recent challenges, the company maintains strong fundamentals with a Financial Health Score of 2.38 (FAIR).
The analysts at HSBC highlighted that Chevron’s stock no longer trades on par with its European counterparts in terms of total distribution yield, a change that comes after the company reduced its buyback program. This adjustment in shareholder distributions has been a contributing factor to Chevron’s stock underperforming when compared to its peer Exxon (NYSE:XOM) over the past month, as global oil prices have declined. However, InvestingPro analysis shows Chevron maintains a robust 4.83% dividend yield and has consistently raised dividends for 37 consecutive years, demonstrating long-term commitment to shareholder returns.
HSBC’s assessment suggests that Chevron’s current 12-13% discount to Exxon on projected 2025-26 price to cash flow (P/CF) ratios accurately reflects the heightened risks associated with Chevron’s stock. Moreover, the gap in distribution yields between Chevron and Exxon has diminished, which was part of the rationale behind the downgrade and price target adjustment.
The downgrade and the new price target reflect HSBC’s revised expectations for Chevron’s future performance, especially in light of the company’s scaled-back buyback program. The analysts have factored in market anticipation of the buyback cut, which has already influenced Chevron’s share performance negatively in recent weeks.
Chevron’s stock movement in the upcoming period will likely be influenced by this new rating and the adjusted price target, as investors digest the implications of HSBC’s analysis and Chevron’s strategic financial decisions. InvestingPro analysis indicates the stock is currently undervalued, with additional insights available through their comprehensive Pro Research Report, which provides deep-dive analysis of Chevron’s financials, valuation metrics, and growth prospects.
In other recent news, Chevron Corporation reported its first-quarter 2025 earnings, surpassing analysts’ expectations with an adjusted earnings per share (EPS) of $2.18, slightly above the forecasted $2.15. However, the company’s revenue fell short of projections, posting $47.6 billion compared to the anticipated $48.39 billion. Chevron continues to focus on cost savings and project expansions, maintaining a strong balance sheet with a 14% net debt ratio. The company returned $6.9 billion to shareholders through dividends and buybacks in the first quarter. Chevron also announced the acquisition of nearly 5% of Hess (NYSE:HES)’ common shares, with plans to complete the merger in the coming months. In terms of production, Chevron achieved first oil at Ballymore in the Gulf of Mexico, with expectations to increase production to 300,000 barrels of oil equivalent per day by 2026. The expansion of the Pasadena refinery has further strengthened Chevron’s Gulf Coast value chain. Additionally, Chevron remains optimistic about generating $9 billion in incremental free cash flow at $60 oil, with ongoing developments expected to bolster growth.
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