We recently compiled a list of the 7 Blue Chip Stocks with Low PE Ratios. In this article, we are going to take a look at where Chevron Corporation (NYSE:CVX) stands against the other blue chip stocks with low PE ratios.
In the current financial landscape, characterized by shifting market sentiments and evolving economic indicators, the spotlight on blue-chip stocks with low price-to-earnings (P/E) ratios has intensified. As investors seek stable and potentially undervalued options, understanding the broader context of interest rate movements, inflation trends, and market performances becomes crucial.
Recent data indicates that bond traders are increasingly skeptical about the Federal Reserve’s likelihood of implementing further rate cuts this year. Current market expectations reflect only a 20% chance that rates will remain unchanged during either the November or December meetings. Just last week, following an unexpectedly strong jobs report, traders had anticipated over 50 basis points in cuts by year-end. This significant shift underscores a growing belief that robust U.S. economic data is diminishing the probability of consecutive cuts, which has implications for investment strategies across the board.
As a result of these evolving expectations, the dollar is currently on track for its second consecutive weekly gain, bolstered by a 0.5% increase this week alone. The Bloomberg Dollar Spot Index has gained 1.7% in October, propelled by resilient economic indicators that suggest a more cautious approach from the Fed. In contrast to other central banks that may pursue additional monetary easing, the Federal Reserve appears to be recalibrating its policy stance from a position of economic strength. This backdrop adds an additional layer of complexity for investors assessing their portfolios, particularly those interested in blue-chip equities.
Furthermore, the recent performance of the stock market has been notable, with major indices reaching new all-time highs as earnings season kicks off. A wide range of sectors within the market has shown improvement, with the S&P 500 extending its winning streak into a fifth consecutive week, the longest since May. The KBW Bank Index also saw significant gains, surging by 3% and reaching its highest level since April 2022. This upward momentum can be attributed to several financial institutions posting better-than-expected earnings, signaling a recovery that is gaining traction across various sectors.
Interestingly, inflation trends are also contributing to the current economic narrative. Recent reports indicate that U.S. producer prices remained unchanged in September, reflecting a more favorable inflation outlook. Although year-on-year increases in the producer price index (PPI) showed a modest rise of 1.8%, the smallest gain in seven months, market analysts predict a potential 25 basis points reduction in interest rates next month. Despite the uptick in inflationary pressures in certain sectors, most economists do not view these trends as signs of a broader resurgence in price pressures, suggesting that the overall economic environment remains stable.
As we navigate through this analysis, it will be vital to consider the backdrop of current economic conditions, including interest rate expectations and inflationary trends, to better understand the investment landscape and identify potential opportunities. With that, let us delve into the profiles of these promising blue-chip stocks that align with the search for stable investments amidst a fluctuating market.
Our Methodology
For this article, we use stock screeners to identify nearly 12 stocks above $200 billion market cap and a forward Price to Earnings (P/E) ratio of less than 15 as of October 11, 2024. Next, we narrowed our list to 7 stocks that were most widely held by institutional investors. The hedge fund sentiment was taken from Insider Monkey’s Q2 database of 912 hedge funds. The seven blue chip stocks are listed in descending order of their forward price to earnings ratio.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An aerial view of an oil rig at sea, the sun glinting off its structure.
Chevron Corporation (NYSE:CVX)
Forward Price to Earnings (P/E) ratio: 12.95
Number of Hedge Fund Holders: 64
Chevron Corporation (NYSE:CVX) is a blue-chip energy company with a strong global presence, making it an attractive option for investors seeking stocks with low price-to-earnings (P/E) ratios. As of October 11, 2024, Chevron’s forward P/E ratio stands at 12.95, making it a compelling inclusion in the list of blue-chip stocks with low P/E ratios. Despite a slight miss on earnings expectations for Q2 2024, with reported earnings per share (EPS) of $2.55 compared to the expected $2.93, Chevron’s fundamentals remain robust.
Chevron Corporation (NYSE:CVX) production has been a standout factor, increasing by more than 11% year-over-year, supported by record output from the Permian Basin. The company is capitalizing on its deepwater expertise, with projects like the Anchor in the Gulf of Mexico poised to deliver high cash margins and low carbon intensity. Production growth is expected to reach 300,000 barrels per day by 2026, demonstrating Chevron’s long-term growth potential.
In terms of financials, Chevron Corporation (NYSE:CVX) reported Q2 2024 earnings of $4.4 billion, or $2.43 per share, with adjusted earnings of $4.7 billion, or $2.55 per share. Despite operational challenges, including downtime and higher exploration expenses, Chevron managed to generate nearly $9 billion in cash flow, excluding working capital adjustments. The company continues to prioritize shareholder returns, distributing $6 billion through dividends and share repurchases during the quarter.
Chevron Corporation (NYSE:CVX) strong balance sheet, with a net debt ratio of 10.7%, positions it well for future growth and stability. Furthermore, its ongoing capital projects, including green hydrogen and renewable diesel initiatives, highlight its commitment to transitioning towards sustainable energy solutions. These developments, coupled with Chevron’s efficient capital expenditure management and strong production outlook, make the company an appealing long-term investment.
Overall, Chevron Corporation (NYSE:CVX) steady cash flow, commitment to returning value to shareholders, and forward P/E ratio of 12.95 make it a strong candidate for inclusion in any portfolio of blue-chip stocks with low P/E ratios. The company’s ability to navigate short-term operational challenges while maintaining a focus on long-term growth reinforces its standing as a top-tier investment option in the energy sector.
Overall CVX ranks 7th on our list of the blue chip stocks with low PE ratios. While we acknowledge the potential of CVX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CVX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.