Chevron’s Fundamentals Shine Through Market Turmoil

Key Points

• Chevron's stock is trading near three-year lows due to oil price fluctuations and tariff policies, highlighting its cyclical nature.
• The company's solid fundamentals include significant free cash flow, ongoing share buybacks, and a strong dividend history.
• Investors' outlook on Chevron stock depends on their economic outlook, with potential opportunities for long-term gains.

Chevron Corp. NYSE: CVX stock has been surprisingly volatile since it announced earnings on May 2. Supply and demand are under pressure from the current administration’s tariff policies. Plus, like all oil companies, Chevron has been facing oil prices under $60 since OPEC+ announced it was increasing production. The move by OPEC+ underscores the cyclical nature of energy stocks in general and, in particular, oil stocks. It’s also where an opportunity is presenting itself to long-term investors.

For the first quarter 2025 earnings, Chevron beat earnings per share estimates by three cents. However, the $2.18 EPS was 30% lower on a year-over-year (YOY) basis. The company's revenue also came in light. The $47.61 billion was less than the $49.05 billion expected by analysts.

Investors weren't completely surprised when Chevron came in light on revenue. However, the subsequent volatility has been unusual for a stock normally known for stability. CVX stock dropped about 2% after the report came out, but rallied hard and ended the day up 2.6%.

The gains were short-lived, however, after OPEC+ announced it would increase production. That announcement will only add to the cyclical weakness in energy stocks tied to the oil market.

Chevron Is Still Waiting for Its Trump Bump

On the company's conference call, Chevron's chief executive officer, Mike Wirth, made it clear that the Trump administration’s tariff policy was a key reason why oil prices continue to be under pressure. At the beginning of April, before the proposed tariffs were announced, oil was trading in the mid-$80 range. As of May 5, it’s under $60 a barrel.

In fact, that cyclical weakness is the reason the company is citing for pulling back on the amount of its share buybacks. In the coming quarter, Chevron expects to buy back between $2.5 billion and $3.0 billion of shares. That’s approximately 30% less than the $3.9 billion it purchased in the first quarter.

Another unique area of contention between Chevron and the Trump administration is the company’s drilling operations in Venezuela. Chevron is the only U.S. oil company with active operations in the country, and it exports more than 25% of the country’s entire oil output (approx. 240,000 barrels per day).

Why Chevron’s Weaknesses May Actually Highlight Its Strength

With the exception of the OPEC+ announcement, the other macroeconomic impacts on Chevron were known before the earnings report. That isn’t stopping traders from selling first and asking questions later. However, if you’re an investor with a long-term outlook, the fundamentals matter.

For example, Chevron still extracts over 3.35 billion barrels of oil daily. This results in a significant increase in free cash flow, which the company has shown will increase shareholder value.

This leads to another point. Some analysts are expressing concern that Chevron is trimming its buybacks at a time when Exxon Mobil Corp. NYSE: XOM and Shell plc NYSE: SHEL announced that each was maintaining buybacks at their current levels.

However, Chevron’s program was one of the richest of its kind to begin with. The company has repurchased approximately $50 billion worth of shares in the last three years.

Furthermore, even if it maintains the current level of buybacks for the remainder of 2025, it will still be within its prior annual guidance for between $10 billion and $20 billion in buybacks.

Plus, Chevron is a Dividend Aristocrat, increasing its dividend last quarter for the 38th consecutive year.

Chevron Stock Outlook Depends on Broader Economic Trends

The decision to buy Chevron stock largely depends on an investor's economic outlook. Investors expecting a recession may see further downside ahead for CVX. However, with shares trading near a three-year low and a relative strength index in the high 30s, there’s a case to be made that the recent sell-off may be overdone.

On the other hand, those anticipating a sharp economic recovery may expect oil stocks to lead the rebound. But by the time that momentum is clear, it may be too late to buy in at a discount. That’s why now could present an attractive entry point for long-term investors, allowing them to pick up Chevron shares at a relative bargain while collecting a reliable dividend in the meantime.