ChevronTexaco (CVX)

SSG and PERT A (07-06-2006) | Google Stocks | Company Website

Growth. ChevronTexaco is not a classic growth company. However, the increasing demand for energy, the increase in energy prices and acquisitions have caused CVX’s revenues to grow at an annualized rate 16.5% over the past ten years. Earnings have grown at 12.2% over the same period. The attached SSG assumes a 5-year revenue and EPS growth rate of 5.7%. Value Line projects 5% revenue growth and 11.5% earnings growth. The First Call consensus projects EPS growth at 7.1%. So the SSG rate of 5.7% is convervative.

Valuation. Valuing energy companies is a specialty. Classic NAIC-type analysis is helpful but not very. So let’s look at what the experts say. McDep Energy Investment Research makes it energy stock recommendations and investment research available to the public (with a slight time lag from its subscribers). The “McDep” ratio provides a relative measure of whether an energy company is over or under valued using futures prices and assumption about energy reserves. Of the so called “mega caps,” CVX has the lowers McDep ratio (lower is better). See page 5 of the McDep “Meter Reader” report. Also the McDep web site have posted several reports discussing CVX

Bottom line. If energy prices recede, CVX will show a modest return. CVX currently pays an annual dividend $1.60 (3.13% yield) and earnings should grow at about 5%. Under this scenario, the projected average return for CVX is 12.2%. (This assumes a projected high PE of 12.1.) If energy prices remain the same or increase, CVX has considerable price appreciation potential.

Company Description. ChevronTexaco Corporation, a Delaware corporation, manages its investments in subsidiaries and affiliates and provides administrative, financial and management support to U.S. and foreign subsidiaries that engage in fully integrated petroleum operations, chemicals operations, coal mining, power and energy services. The company operates in the United States and in more than 180 other countries. Petroleum operations consist of exploring for, developing and producing crude oil and natural gas; refining crude oil into finished petroleum products; marketing crude oil, natural gas and the many products derived from petroleum; and transporting crude oil, natural gas and petroleum products by pipeline, marine vessel, motor equipment and rail car. Chemicals operations include the manufacture and marketing, by an affiliate, of commodity petrochemicals for industrial uses, and the manufacture and Marketing, by a consolidated subsidiary, of fuel and lubricating oil additives.