Chevron's 'defensive characteristics' make it well-positioned for economic uncertainty, JPMorgan says

By Claudia Assis

Chevron says it is on track to 'reward stockholders' as JPMorgan increases rating on the stock to buy

Analysts at JPMorgan upgraded their rating on Chevron Corp. stock to buy on Wednesday, saying the energy giant's "defensive characteristics" are becoming more important amid economic uncertainty and the stock's valuation is also attractive.

The analysts, led by John Royall, also raised their price target on Chevron stock (CVX) by about 5.5% to $170 a share, representing an upside of about 13% over Wednesday's share prices.

"All in, we think [Chevron] has solid defensive characteristics in a market where defensiveness has become more important, and project execution risk is a less significant factor than it has been in nearly a decade, while valuation has normalized relative to the group and to [Exxon Mobil Corp. (XOM) ]," the JPMorgan analysts said.

Chevron held its shareholder meeting on Wednesday, with Chief Executive Michael Wirth assuring investors that the company was on track to meet financial goals.

"Our financial priorities have remained consistent, as we aim to reward stockholders with dividend growth, invest for long-term returns, maintain a strong balance sheet to mitigate commodity price risk and return surplus cash via share buybacks through the cycle," Wirth said.

JPMorgan had downgraded its rating on Chevron stock to the equivalent of hold in March 2022, partly on valuation following a rally for the stock around that time.

"Today, [Chevron's] valuation premium has narrowed meaningfully, while upside to our price target is essentially in line with our U.S. group average following a period of underperformance," the analysts said Wednesday.

Chevron looks good among other integrated energy companies "in a recessionary demand environment," in part due to Chevron's smaller exposure to refining and chemicals than Exxon, they said.

Moreover, Chevron has a "defensive" balance sheet with $15 billion of cash on hand, likely to allow the company to keep intact its capital and share buyback programs.

Shares of Chevron have lost about 16% in the year, contrasting with gains of around 9% for the S&P 500 index.

-Claudia Assis

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05-31-23 1311ET

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