Can Chevron Beat Its Bigger Dow Rival?

Tomorrow, Chevron (CVX -0.86%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed kneejerk reaction to news that turns out to be exactly the wrong move.

As the smaller of the two energy stocks in the Dow Jones Industrials, Chevron always seems to have something to prove. Yet, the company has actually done a better job than its larger rival in many key areas. Let's take an early look at what's been happening with Chevron over the past quarter, and what we're likely to see in its quarterly report.

Stats on Chevron

Source: Yahoo! Finance.

Can Chevron keep gushing profits this quarter?
Analysts have gotten more optimistic about Chevron's prospects in recent months, raising their earnings estimates for the just-ended quarter by $0.03 per share, and making about a 1% increase to their consensus for the full 2013 year. The stock has been at all-time record highs, but has only risen about 4% since mid-January, as prospects for the energy industry become cloudier.

The main concern among Big Oil stocks is that replacing the natural decline in production of existing wells becomes increasingly difficult. In that vein, however, Chevron has excelled compared to its archrival, ExxonMobil (XOM -0.57%). Even as Exxon has struggled just to maintain slow growth of about 2% to 3%, Chevron expects a much faster rate of about 6% annual growth over the next four years.

Chevron is using worldwide finds of newly discovered resources to help bolster that growth. Earlier this week, the company announced yet another natural-gas find off the western coast of Australia, which has been a hotbed of energy activity as of late, and has produced 21 discoveries since mid-2009. The company also found oil in the Gulf of Mexico at its Coronado deepwater site, which it shares with ConocoPhillips and Anadarko Petroleum, as well as privately held Venari Offshore LLC. With huge assets in the Gulf and Australia, as well as off the coasts of Brazil and western Africa, Chevron has no lack of future growth potential to deliver on its goals.

But Chevron hasn't been without controversy. Its ongoing legal battle in Ecuador, which it inherited through its purchase of Texaco, involves a potential $19 billion fine, and extensive damage from the discharge of billions of gallons of oil waste into the Amazon rainforest. With such massive amounts of money on the line, how the arguments on both sides get resolved will make a big impact on Chevron.

When Chevron releases its quarterly report, be sure to compare the key figures on sales, profits, and production growth with those of ExxonMobil, which reported this morning. Any signs that Chevron is continuing to outperform its larger rival could propel the stock even higher from its already lofty levels.

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