Does A Good Fourth Quarter Make Chevron a Buy?

Chevron’s peers include Exxon Mobil Corporation (NYSE:XOM), BP plc (NYSE:BP), Occidental Petroleum Corporation (NYSE:OXY), and ConocoPhillips (NYSE:COP). These stocks generally trade between 9 and 11 times their expected 2013 earnings, so Chevron is towards the lower end of the range- though they do all look somewhat cheap. Partly due to energy prices, BP is the only one of these four to report higher profits in the third quarter of 2012 than a year earlier. BP also has a high dividend yield and we can explain part of its low pricing with poor investor sentiment; it too could be a good value. Exxon Mobil is towards the higher end of the P/E range, which makes some sense given its market leadership. That company’s decline in sales and net income was moderate, at 8% apiece, and it might also be worth considering.

Occidental and ConocoPhillips had their earnings fall by 20% or more, and their stock prices are down somewhat in the last year as well. ConocoPhillips in particular does offer a nice dividend yield, but we think that for the time being we’d opt for the three oil companies we’ve previously discussed. Exxon Mobil, BP, and Occidental also made our list of the most popular energy stocks among hedge funds, going by our database of 13F filings (see the rest of the ten most popular energy stocks).

If Chevron is truly going to report decent q/q earnings growth, and set itself up for a single-digit multiple of its 2012 earnings, we think that investors who can tolerate some exposure to oil and gas prices should consider it. BP and Exxon Mobil also seem like they might be good businesses trading at low valuations.

Disclosure: I do not own any stocks mentioned in this article.