With 2012 just beginning, now's a smart time to gauge how the stocks you're interested in are likely to do this year and beyond. By knowing what stock analysts and fellow investors expect from a stock, you'll be smarter about whether you should buy it for your portfolio -- or sell it if you already own it.
Today, let's take a look at Chevron (NYSE: CVX). As I discussed last month, Chevron had a strong 2011 on the back of high oil prices and a range of new exploration activity. But with so many irons in the fire, can Chevron keep its focus as a top oil stock? Below, I'll take a closer look at what people expect from Chevron and its rivals.
Forecasts on Chevron
| Median Target Stock Price | $123 |
| 2011 EPS Estimate | $13.87 |
| 2012 EPS Estimate | $13.08 |
| Expected Annual Earnings Growth, Next 5 Years | 7% |
| Forward P/E | 8.3 |
| CAPS Rating | ***** |
Source: Yahoo! Finance.
How Chevron could dominate 2012
As you can see, analysts have a somewhat mixed picture about Chevron. On one hand, the current target price represents about a 14% jump for the stock. Yet with earnings expected to drop in 2012, the picture for Chevron seems a bit clouded, despite its cheap valuation.
The U.S. may be Chevron's home, but the company's fortunes in 2012 will largely come from overseas. With Iran's recent actions in the Persian Gulf, the oil market faces the threat of supply disruptions that would come from a closure of the Strait of Hormuz. A resolution to that conflict could bring oil prices down sharply, while an escalation could similarly push them upward.
Elsewhere, Chevron has huge potential in Brazil. But a recent oil spill there prompted the Brazilian government to sue Chevron and drilling contractor Transocean (NYSE: RIG) for $11 billion in alleged damages. Some believe that the move reflects discrimination in favor of Petroleo Brasileiro (NYSE: PBR), but regardless, Chevron will have to navigate tough waters in Latin America's biggest economy in order to build its presence there.
Also in Latin America, Venezuela's controversy with ExxonMobil (NYSE: XOM) has implications for Chevron as well, as the company has a 34% stake in a project in Venezuela. Along with ConocoPhillips, Chevron will wait anxiously to see if the economic environment becomes any friendlier under the current leftist government.
All in all, though, what would help Chevron more than anything would be strength in natural gas prices. With its acquisition of Atlas Energy last year, Chevron has even bigger exposure to natural gas than it once did. The right move could push profits above what analysts are expecting.
Still, Chevron is too big to provide truly massive gains. If you'd rather jump into the biggest potential gainers in energy, learn more about three other stocks that will prosper from $100 oil in the Motley Fool's latest special free report on energy. It's yours free, but only for a limited time, so take a look today.
Click here to add Chevron to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.
