Chevron stock target cut by Truist Securities

On Monday, Truist Securities adjusted their outlook on Chevron (NYSE: NYSE:CVX), lowering the price target to $156 from $166 while maintaining a Hold rating on the shares.

The firm's decision comes after a revision of their financial models and forecasts for the years 2024 to 2026.

The new price target is based on an updated valuation approach that balances two primary methodologies. The first relies on a 2025 Enterprise Value/EBITDAX (EV/EBITDAX) multiple of 5.5 times, which is above the peer average of 4.1 times. This multiple is applied to the firm's estimated 2025 EBITDAX of $65,106 million, a figure that surpasses the consensus estimate of $59,191 million.

The second methodology used in determining the price target is a Free Cash Flow to Enterprise Value (FCF/EV) Yield assumption set at 10.0 percent. This dual-method approach aims to provide a comprehensive valuation framework for the energy company's stock.

Chevron's new target reflects a more conservative outlook from Truist Securities, as they have recalibrated their expectations in light of the revised price deck. The Hold rating suggests that the firm sees limited upside or downside potential in Chevron's stock at the current level.

In other recent news, Exxon Mobil (NYSE:XOM) is challenging Chevron's planned $53 billion acquisition of Hess, a dispute centered on the control of Hess' subsidiary in Guyana. This conflict is unfolding amid a race for the largest oil find in nearly two decades, located offshore Guyana. Analyst James English from Clark Hill Law suggests that the outcome of the arbitration depends on the interpretation of the confidential joint operation agreement that governs the operations in the Stabroek oil block in Guyana.

In a related development, Bernstein SocGen Group upgraded Hess Corp (NYSE:HES). stock, citing potential benefits from a successful merger with Chevron. The upgrade was based on several factors, including market conditions affecting oil prices and the energy sector, and the potential for Hess shareholders to benefit from a 16% upside if the merger concludes successfully.

House Republicans have asked for federal agencies to review regulations potentially impacted by a recent Supreme Court ruling. The ruling overturned a legal doctrine known as "Chevron deference," which had allowed government agencies to interpret ambiguous laws. This move could pave the way for conservative activists to challenge specific regulations in court.

Meanwhile, the Texas energy sector is on high alert due to the approaching Storm Beryl, which threatens the epicenter of the United States' energy production. Major oil producers such as Shell (LON:SHEL) and Chevron have either ceased operations or evacuated personnel from their offshore platforms in the Gulf of Mexico in response to the storm.

Also, according to a recent client note from Goldman Sachs, hedge funds have increased their purchases of commodity-sensitive stocks at the fastest rate in the last five months. This includes a marked preference for energy and materials stocks, despite the downturn in energy stocks due to Tropical Storm Beryl's impact on the Caribbean.

InvestingPro Insights

In light of Truist Securities' revised price target for Chevron, real-time data from InvestingPro offers additional context for investors considering the stock. Chevron's market capitalization stands robust at $290.27 billion, reflecting its significant presence in the industry. The company's Price/Earnings (P/E) ratio is currently at 14.61, which is below the adjusted P/E ratio for the last twelve months as of Q1 2024, suggesting a potentially more attractive valuation for investors. Moreover, Chevron's dividend yield is notable at 4.1%, underscoring its appeal to income-focused investors.

Two key InvestingPro Tips further enrich the analysis: Chevron has a commendable track record of raising its dividend for 36 consecutive years, highlighting its commitment to returning value to shareholders. Additionally, the company is recognized as a prominent player in the Oil, Gas & Consumable Fuels industry, which may provide investors with confidence in its stability and long-term growth potential. For those looking for a deeper dive into Chevron's performance and prospects, there are 8 additional InvestingPro Tips available, which can be accessed through InvestingPro's platform. Interested readers can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.

Overall, while Truist Securities maintains a Hold rating on Chevron, the InvestingPro data and tips provided offer a broader perspective on the company's financial health and potential as an investment.

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