HSBC downgrades Chevron on reduced valuation upside, shareholder distributions cut

Investing.com -- HSBC (LON:HSBA) has downgraded Chevron (NYSE:CVX) from Buy to Hold, citing reduced valuation upside and a cut to shareholder distributions.

The downgrade comes amid a broader reset across the oil majors, triggered by a fall in Brent prices to the low $60s per barrel, pressuring financial frameworks previously anchored around $70/b.

“We downgrade Chevron from Buy to Hold on lower shareholder distributions after the company cut buybacks with 1Q results,” HSBC analysts led by Kim Fustier wrote.

Chevron’s second-quarter buyback was reduced to $2.5–3 billion, a marked drop from the $4–4.75 billion pace seen previously. This implies a full-year rate of $10–12 billion, well below the earlier $17.5 billion run-rate.

The bank also cut its target price on Chevron to $158 from $176, now implying 15% upside from the current share price. Analysts added that Chevron now trades at a 12–13% discount to ExxonMobil (NYSE:XOM) on 2025–26 estimated price-to-cash flow, which “adequately reflects greater risks.”

Operationally, Chevron delivered a solid first quarter, with upstream production slightly beating consensus. However, cash flow fell short, missing expectations by 6%.

The company has not altered its $15 billion capex plan for the year but retains flexibility given two-thirds of its capital expenditures are tied to short-cycle shale or near-term projects.

HSBC’s earnings per share (EPS) forecasts for Chevron were slashed by 18% for 2025 through 2027, while cash flow per share estimates dropped 4–9% over the same period.

These revisions reflect updated oil and gas price assumptions, which now see Brent at $68.5/b in 2025, down from a prior forecast of $73/b.

Among peers, HSBC maintains Buy ratings on Shell (LON:SHEL), TotalEnergies (EPA:TTEF), Eni SpA (BIT:ENI), Equinor ASA (OL:EQNR), and Galp Energia Nom (ELI:GALP), citing stronger balance sheets or more resilient distribution capacity. “We see the highest implied upside to our target prices for Galp (26%) and Shell (20%),” the analysts wrote.