Chevron Shares: A Great Value

We are upgrading Chevron Corp. (CVX) shares to Buy from Hold following the stock’s recent commodity-price related weakness. We think that the risk-reward trade-off is very favorable at current levels.

While a weak oil price environment may weigh on the stock over the coming weeks, we believe that Chevron’s strong pipeline — which is projected to add more than 1 MMBOE/d by 2011 — and impressive recent exploration successes have significantly improved its long-term upstream growth prospects.

We believe that the company is capable of generating above peer group average production and reserve growth in the long run. Our unchanged $100 price objective is based on 7.3x our raised 2009 EPS estimate, in-line with its historical trading pattern relative to its peers.

The management has made significant progress in re-balancing the company’s asset portfolio by divesting non-core and high-cost assets. Chevron has a very strong balance sheet, with more cash on its balance sheet than long-term debt. It has a growing dividend that currently yields an attractive 3.01%. The 12.1% dividend increase in the second quarter was the 21st consecutive annual dividend increase.

Read the full analyst report on CVX

Posted in Categories: Contributor, Energy, External Research, Stocks, USA.

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