49% Gains Haven’t Stopped Wall Street From Calling Energy Stocks ‘Behind’
Quick Read
-
Exxon (XOM) gained 49% and Chevron (CVX) rose 38% over the past year, crushing the Wall Street claim that energy stocks have lagged.
-
Chevron locked a 20-year, 2.67-gigawatt power deal with Microsoft (MSFT), adding a long-dated AI-linked revenue stream to its business.
-
WTI has slid from $102 to $84, and an EIA forecast of $79 Brent in 2027 could compress estimates and erode the value case.
-
Building a portfolio and living off one are two completely different skills, and almost nobody teaches the second. This problem is what The Definitive Guide to Retirement Income helps, and it is free today. Read more here. (Sponsor)
On CNBC on Friday, Oct. 2, Michael Cuggino, president of Permanent Portfolio Family of Funds, said energy stocks “have not kept up with the broader market even as we speak.” He used that point to recommend Chevron (NYSE:CVX) and ExxonMobil (NYSE:XOM) as cheap total-return plays. The performance numbers point the other way.
Oil Majors Have Outrun the Index by a Wide Margin
As of Friday’s close on Oct. 2, Exxon is up more than 34% over the past year at $164.39. Chevron is up nearly 33% at $207.20. Over the same period, the S&P 500 gained less than 13%. Chevron also set a 52-week high of $214.06 on Sept. 11. Over the last month, the benchmark index edged up 0.75%, while Chevron lost 2.16% and Exxon gained 0.15%.
Cuggino’s Valuation Case Holds Up, With One Adjustment
Cuggino’s argument is about price. He said both stocks trade at about 13 times next year’s earnings, with dividend yields of 3.5% and 2.5%. He compared that with an S&P 500 offering a 4.5% earnings yield. Checked against consensus 2027 EPS of $14.1367 for Chevron and $11.0760 for Exxon, both stocks trade closer to 15x. Their current yields are 3.42% and 2.53%. That is a little more expensive than the on-air figure, but still a discount to the market.
——
Now Available: The Definitive Guide to Retirement Income
Many successful investors eventually reach the same moment. The saving is done, the portfolio is built, and the question quietly changes from how much can I grow this to how much can I take out? Get that second question wrong and decades of good investing can come apart in a handful of years.
That is exactly what The Definitive Guide to Retirement Income helps answer. It covers what your retirement could actually cost, which income sources are worth using, and the withdrawal math that decides whether the money lasts. It is free today from Fisher Investments. Read More Here ›
——
Others share his view. On Sept. 8, Jim Cramer called Chevron the portfolio version of a kicker: an excellent 3.44% yield that usually doesn’t move with the rest of the market.
Rising Earnings Estimates Explain the Rally
Chevron’s second quarter brought adjusted EPS of $6.06, revenue up 51.4% to $67.20B, and free cash flow of $18.1 billion. Brent averaged $104 per barrel in the quarter. CEO Mike Wirth said: “Costs always matter. They always will.”
Analysts have been raising their numbers. The 2027 consensus for Chevron was $12.6254 90 days ago. Over the past 30 days, 10 analysts revised up and 3 revised down. Exxon CEO Darren Woods described a quarter with “more than $14 billion of earnings, more than $17 billion of free cash flow, and a more than $7 billion reduction in net debt.”
Microsoft Is Buying Chevron’s Power for AI
Chevron signed a 20-year take-or-pay power purchase agreement with Microsoft (NASDAQ:MSFT). The deal covers 2.67 gigawatts of capacity for a West Texas data center complex, and Chevron expects “mid-teens returns.” Wirth said the company is ready “to help power American AI dominance.” The companies building AI depend on energy majors to grow, and this deal gives Chevron a long-dated source of committed revenue.
A Slide in Crude Would Undercut the Pitch
WTI peaked at $102.13 in May and fallen to $83.9 by August. In its May outlook, the EIA forecast Brent averaging $79.39 in 2027. If prices follow that path, estimates shrink and today’s 15x multiple looks less cheap. Wall Street is also split: Chevron has 20 Buy ratings or Strong Buy ratings, while Exxon has 15 Hold ratings.
The stocks have already outpaced the market on returns. The case for owning them now rests on valuation, income and earnings revisions. Watch the third-quarter reports, where consensus calls for $4.7322 per share at Chevron and $3.6501 at Exxon.
Released: The Definitive Guide to Retirement Income
(Sponsor) Most people spend their entire working lives focusing on one thing: growing a pile of money. Then they retire and discover the skill they actually need is close to the opposite. Turning that pile into steady income, year after year, through good markets and bad, without ever running out.
It may be the least discussed and most consequential transition in personal finance, and plenty of otherwise careful investors walk into it with no real plan. That is exactly what The Definitive Guide to Retirement Income helps answer. It is a free guide from Fisher Investments covering what your retirement will really cost, where the cash flow should come from, and how much you can safely withdraw each year. Learn more here. Learn More Here ›
Contact editorial@247wallst.com for any questions or corrections.