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Leigh Baldwin & Co.

112 Albany Street, Cazenovia, NY 13035 | Phone: (315) 655-2964 Toll Free: 1-800-659-8044

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Stock of the Week

Chevron

August 6th 2010 Chevron
NYSE Symbol: CVX
Industry: oil
Price as of 8/6/10: $78.73


The major averages have been performing great for the last month. This week, the averages were set to take off, but weak unemployment data has held back many investors from making a bigger bet on a recovery. One sector that has not slowed down it's recent torrid pace is commodities. This week we'll
feature an oil giant that has perked up as of late and with go ex-dividend in two weeks. The stock of the week is Chevron. Back on July 7, we featured a number of blue chips trading for 10 times earnings and sporting dividend yields
of 2 to 3%. Chevron was one of the blue chips that easily made the cut. Better than expected earnings two weeks ago and an uptick in oil has caused the stock to improve, but since we featured the stock back in October, the stock is only up 2.3%. Luckily, investors have also received another 2.7% in dividends, and
thanks to a dividend hike last quarter, the yield has only improved. Even if the U.S. economy continues to struggle, the rest of the world is performing better which is good news for Chevron.
Two weeks ago, Chevron's second-quarter earnings tripled on better refining margins and higher prices for oil and natural gas, Chevron reported net income of $5.4 billion, or $2.70 per share, for the three months. That compares with $1.7 billion, or 87 cents per share, in the same quarter last year. Revenue at the San Ramon, Calif. oil major rose to $53 billion, from $40.2 billion, boosted by higher prices for crude oil, natural gas and refined products such as jet fuel. Worldwide net oil-equivalent production rose 3% to 2.75 million barrels per day, as Chevron benefited from
major project ramp-ups in the U.S. and Brazil, and expansion of capacity at Tengiz in Kazakhstan. In the conference call, the Chairman stated that Chevron had another very successful quarter, both operationally and financially. Current quarter earnings from upstream operations are benefiting significantly from higher prices for crude oil and natural gas and higher net oil-equivalent production. In the downstream, improved margins for refined petroleum products contributed to increased earnings. Chevron lifted its 2010 production view for growth of 3%, up from its earlier estimate of 1%. One analyst following the earnings commented that Chevrons stronger worldwide downstream profits
and lower corporate charges which, in the aggregate, more than offset slightly
weaker than expected upstream results. Favorable overall earnings variance was
attributable to mark to market derivative gains and prior period tax adjustments.
Even with the modest uptick in the stock of late, the valuation remains cheap. Currently the stock is trading for 8 times this years earnings, 7.9 times next years earnings. The stock also trades for 1.6 times book value of $47.47 a share and the company has more cash than debt. Not bad. As mentioned the stock goes ex-dividend in two weeks and sports a 36%. For income investors Chevron is a good stock that seems to be perking up once again.