Why Chevron Stock Dropped Today

Shares of Chevron (CVX -6.00%) were down 5.5% as of 1:30 p.m. ET Friday after the oil giant posted weaker-than-expected quarterly earnings.

Chevron’s profits plunged on lower oil prices

Chevron’s third-quarter operating revenue declined 18.3% year over year, to $52 billion — worse than estimates calling for a 17.9% drop — primarily driven by lower commodity prices. On the bottom line, that translated to adjusted (non-GAAP) earnings of $5.72 billion, or $3.05 per share — down from $5.56 per share in the same year-ago period and well below analysts’ consensus estimates for $3.33 per share.

Still, Chevron Chairman and CEO Mike Wirth was quoted in a company press release as calling it “another quarter of solid financial results and strong cash returns to shareholders,” noting the company has returned $20 billion to investors so far this year through a combination of share repurchases and dividends.

What’s next?

Chevron closed on its acquisition of PDC Energy during the quarter, expanding its presence in the Denver-Julesburg (DJ) and Permian Basins in the United States.

And of course, only a few days ago the company agreed to acquire Hess Corporation (NYSE: HES) — a blockbuster $60 billion deal that’s expected to close in the first half of 2024. When that happens, management has already signaled they plan to use the resulting increased cash flow to return even more capital to shareholders through higher dividends and buybacks. 

In the meantime — though the price of oil has rebounded modestly in since August — Chevron’s fortunes are inexplicably tied to the price of the underlying commodity that drives its business. It’s no surprise, then, to see shares pulling back in response to its earnings weakness today.