At first glance, Chevron's fourth-quarter numbers looked good, with the oil giant earning $3.1 billion, or $1.64 per share. This was well ahead of the consensus estimate of $1.22 per share. However, the results included a $2 billion benefit from recent changes in the U.S. tax code. That masked weakness in the company's international refining operations, which only pulled in $84 million of earnings last quarter, down from $357 million in the year-ago period.
Those results came on the heels of an equally disappointing report from fellow oil giant ExxonMobil (NYSE:XOM). Those dual disappointments led analysts to trim their price targets on these big oil companies. Wells Fargo, for example, maintained its outperform rating on Chevron but cut its price target from $129 to $125, while tweaking its target for Exxon from $88 to $87. Meanwhile, Jefferies maintained its buy rating on Chevron but snipped its price target from $152 to $149 per share, while also adjusting Exxon's from $90 to $88.
That said, analysts generally had a more favorable view on Chevron's quarter than Exxon's. That's why, for example, Barclays upgraded Chevron from equal weight to overweight and raised its price target from $130 to $135, citing its belief that the company's fundamentals are improving faster than its peers. That included Exxon, which it downgraded from overweight to underweight, while cutting its price target from $84 to $91. That upgrade was one reason Chevron managed to slightly outperform Exxon last month, which was a brutal one for the oil giant after it plunged 15%.
As a result of last month's slide, Chevron is starting to become a very compelling stock for income seekers, especially after recently increasing its dividend 3.7%, which pushed its yield close to 4%. The oil giant firmly believes that the payout is on solid ground.
In fact, CEO Michael Wirth recently stated that "we intend to grow free cash flow in 2018 and thereafter...even with no commodity price appreciation." Because of that, the company believes it can increase its dividend over time and could soon resume its share-repurchase program.