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April 27, 2012 at 14:18 PM EDT
Chevron Earnings & Yield Rise Thanks To Oil
Chevron’s earnings rose in the first quarter, something other U.S. energy giants couldn’t pull off. The company raised its dividend by 11% too. Yet shares of the integrated oil giant Chevron (CVX) were flat Friday, near $106.30. The big integrated exploration and refining companies admittedly don’t offer big swings in price, unless commodity prices are [...]

Chevron’s earnings rose in the first quarter, something other U.S. energy giants couldn’t pull off.

The company raised its dividend by 11% too. Yet shares of the integrated oil giant Chevron (CVX) were flat Friday, near $106.30.

The big integrated exploration and refining companies admittedly don’t offer big swings in price, unless commodity prices are volatile. U.S. crude prices were mostly flat Friday, trading near $104.76. Natural gas futures, which we said last week may have bottomed following some fear that the price could drop to $1, were up about 4 cents to $2.17 per million British thermal units.

Chevron reported diluted earnings of $6.5 billion, or $3.27 per share,  compared to $6.2 billion, or $3.09 per share, in the 2011 first quarter.  Revenue was $59 billion, compared to $58 billion in the year-ago quarter, with strong oil prices offsetting lower production.

More exposure to oil prices than those of depressed natural gas helped. But earnings got a boost from the sale of assets, which were partially offset by negative foreign exchange effects; with those, earnings would have come in at $3.17 per share, according to Simmons & Co. estimates. ExxonMobil (XOM) and ConocoPhillips (COP) reported year-over-year decreases in profits earlier in the week.  On Friday, Total (TOT) reported a one-percent decline in adjusted net income for the first quarter.

Barclays thinks Chevron stock has upside of 25% to its target of $133. Barclays Analyst Paul Cheng writes:

“We think earnings will have a neutral to positive impact on the shares’ near-term performance.  Despite 1Q12 earnings results coming in slightly lower than consensus and our expectations, we think the market will focus on the stronger-than-expected upstream results.  Even with a bigger than expected foreign exchange loss and higher exploration expenses, unit profit came in higher than expected, reflecting a much lower cost base (management estimates operating expenses declined $250 million after-tax sequentially).”

Chevron CEO John Watson cited “strong earnings and healthy cash flows” for the dividend hike, and pointed to future growth highlighted by

“… strong customer interest in our Australia LNG [liquefied natural gas] projects that underpin our future growth.”

Exxon accomplished a noteworthy and overdue dividend increase this week that should support the stock price. It is now the largest dividend payer in the world; its indicated yield is 2.6%. Chevron’s dividend increase was its third in just more than one year; its indicated yield is 3.4%.

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