Why Chevron Stock Dropped 4.5% Today

Chevron Corporation (NYSE: CVX) stock fell 4.5% through 10:35 a.m. ET Friday after the company reported a revenue beat but an earnings miss in its morning Q4 report.

Analysts had predicted Chevron would earn $2.11 per share, adjusted for one-time items, on sales of $48.4 billion. Chevron beat that sales forecast with a stick, doing $52.2 billion in business during the quarter. Profits, however, came in a nickel short at $2.06 per share.

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Chevron Q4 earnings

Chevron's adjusted earnings didn't just miss analysts' forecasts. They also declined versus the preceding Q3 and Q4, falling 18% and 40%, respectively. The picture as calculated according to generally accepted accounting principles (GAAP) looks a little better. GAAP profits declined 26% sequentially but were 51% better than what Chevron earned in Q4 2023.

Still, GAAP earnings for Chevron lagged the adjusted number significantly. Chevron's Q4 GAAP profit was only $1.84 per share. The GAAP profit for all of 2024 was $9.72 per share, also down year over year. In a year when Chevron set a new record for production, growing worldwide production of barrels of oil equivalent hydrocarbons by 7%, that's disappointing.

Free cash flow (FCF) also slid significantly at this oil major. Chevron generated cash profits of $4.4 billion in Q4 and $15 billion for the full year, both numbers being worse than what the company reported a year ago.

Is Chevron stock a buy?

Still, CEO Mike Wirth says Chevron is taking steps to "position" the company for "significant free cash flow growth" in the future. Will this promise be enough to lift the stock?

Valued on its GAAP profit, Chevron sells for about 15.5 times trailing earnings. FCF lags reported net income, however, and at $268 billion in market capitalization, Chevron stock costs nearly 18 times FCF.

Even paying a dividend yield north of 4%, Chevron will need to grow its profits in the mid-teens before I can call this stock a buy.

Should you invest $1,000 in Chevron right now?

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.