Big Oil & Gas Names Chevron, Hess, Exxon Mobil Shares Up Today: What's Going On?

Bernstein analyst Bob Brackett revised the rating on several oil majors following their earnings release.

The analyst says the oil market is approaching late-cycle and recommends defensive U.S. integrated oil companies and expects diversified cash flow streams outside core oil & gas production to drive these companies to survive a downturn better than the pure E&P companies.

Brackett reiterated the rating on Exxon Mobil Corp XOM at Outperform and lowered the price target to $139.00 from $140.00.

XOM reported Q3 FY23 adjusted net profit of $9.12 billion, or $2.27 per share, down from $18.682 billion, or $4.45 per share, a year earlier. Analyst estimates stand at $2.37. 

The analyst sees the Pioneer Natural Resources Co PXD acquisition as a grand sandbox for XOM engineers to deploy their current technology and garner synergies.

The analyst revised adjusted EPS estimates to $9.25 (from $9.01) for FY23 and $8.74 (from $9.44) for FY24.

The analyst raised the rating on Chevron Corp CVX to Outperform from Market Perform at a lowered price target of $182 (from $184).

Last month, CVX reported Q3 FY23 total revenues and other income of $54.1 billion, beating the consensus of $51.44 billion and adjusted EPS of $3.05 (down from $5.56), missing the consensus of $3.75.

Related: These Analysts Revise Their Forecasts On Chevron After Q3 Earnings

The analyst says that much of the miss was timing and expects geopolitical tensions wane and a return of CVX Israeli gas.

The analyst notes that volumes are sequentially down in Q3, but the company guided up in Q4 amid several issues that 'veered toward

mundane rather than impactful.' 

The analyst sees several deals in the U.S. midstream in the

coming quarters, combined with downstream deals and shuffling priorities and strategies in the oil patch, to allow CVX to consolidate CPChem. 

Brackett revised adjusted EPS estimates to $13.67 (from $12.94) for FY23 and $12.73 (from $13.53) for FY24.

The analyst downgraded the rating on Hess Corp HES to Market Perform from Outperform at a reduced price target of $166 from $189. 

The analyst sees CVX's HES acquisition as accessing the most

valuable growth runway of any oily basin on earth for a modest premium.

Related: Chevron's Acquisition Of Hess Corp. Sends Ripples Through Energy Sector: Reasons Behind Stock Price Dip

Adjusted EPS estimated is revised to $5.96 (from $5.99) for FY23 and $11.63 (from $11.86) for FY24.

Overall, the analyst lowered the price target of both XOM and CVX to reflect the combinations with PXD and HES, respectively, on modest near-term 'dilution' but fully expect both company's future target prices to reflect the benefits of these deals. 

Also, the HES merger is more strategic to CVX than PXD is to XOM, writes the analyst.

Price Action: CVX shares are trading higher by 3.2% at $148.58, HES by 3.8% at $147.7, and XOM by 2.97% at $108.78 on the last check Thursday.