Q1 Results Are In: Chevron Boosted U.S. Production 24% and Returned $6 Billion to Shareholders. Is CVX Stock a Buy Now?
Key Points
Chevron's production skyrocketed in the first quarter thanks to the Hess acquisition.
The company returned $6 billion in cash to shareholders, including $2.5 billion in share repurchases and $3.5 billion in dividends.
Chevron's (NYSE: CVX) first-quarter 2026 earnings were a bit weak, falling 35% year over year. That figure sounds bad, but it masks material underlying strength. Notably, there was a one-time hit due to the timing of certain hedging activity, which will likely reverse later in the year, making future quarters look even better. With the company growing production by 24% and returning a huge $6 billion in cash to shareholders, is now the time to buy Chevron?
Chevron's earnings aren't telling the whole story
The big story in the energy sector today is the geopolitical conflict in the Middle East. The high energy prices resulting from supply constraints caused by this conflict didn't actually start until partway through the first quarter. Add in the $2.9 billion headwind from the timing of hedging activity, and Chevron's first quarter actually looked fairly weak.
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But there were good things going on underneath that high-level figure. Notably, the Hess acquisition allowed the company to dramatically increase production. That said, Chevron also saw strong production numbers from its Gulf of America and Permian Basin activity. That should set the company up for better financial results in the second quarter and beyond. Meanwhile, the globally diversified integrated energy giant continues to reward investors, paying $3.5 billion in dividends and repurchasing $2.5 billion in stock. It has increased its dividend annually for decades, making its 3.7% yield a fairly attractive option for dividend investors.
Emotions are driving Chevron's price today
From a business perspective, Chevron is usually a good choice in the energy patch. Its business spans the entire energy value chain, and it is financially strong. And, as noted, it is a reliable dividend payer. However, investors need to keep the broader picture in mind. The geopolitical conflict in the Middle East has upended the global energy market, and news flow from the conflict is pushing oil prices higher and lower in quite dramatic fashion.
The conflict has also led to a surge in Chevron's stock, along with the rest of the sector. If oil prices fall sharply after the conflict ends, Chevron's stock is likely to decline, as well. It probably won't matter how well the business is performing on a fundamental level; news-driven emotions will likely drive investment decisions.
Chevron is worried about oil prices
Interestingly, Chevron has warned that current oil prices may be too low, failing to recognize the real-world impact of the oil shortage. That suggests that oil could move even higher, which would benefit Chevron, but it also highlights the disconnect between emotions and business fundamentals in the oil sector right now. Chevron is a well-run company and a solid energy choice for long-term investors. However, if you are thinking of buying it just to take advantage of today's high oil prices, you may want to tread with caution. Emotional investors may not be paying close attention to the fundamentals of Chevron or oil markets in general.
Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.