Last week wasn't a great week for oil stocks, but at least one should keep climbing an upward path. Chevron has increasingly caught the attention of analysts, who like the company's asset sales picture, and love its Q3 numbers.

The oil giant’s third-quarter numbers picture certainly exceeded Wall Street’s outlook. Here’s a quick breakdown:

Results: Net income spiked upward to $7.83 billion ($3.92 per share) vs. $3.77 billion ($1.87 per share) in the same quarter a year earlier. That’s more than double the amount Chevron had posted on a year-to-year basis, in the same quarter in 2010.

Revenue: Increased 29.6% to $64.43 billion from the third quarter of 2010.

Actual vs. Wall St. Expectations: Analysts had pegged the mean estimate for Chevron at around $3.42 per share – a figure CVX surpassed. But it didn’t meet the average revenue estimate of $67.91 billion.

Chevron executives are upbeat over the Q3 numbers -- and should be, analysts and traders say.

“We had another successful quarter,” offers chairman and chief executive John Watson, “with both strong earnings and cash flow. Current quarter earnings for our upstream operations benefited from higher crude oil prices on world markets. At the same time, gains on asset sales and improved margins for refined petroleum products contributed to increased earnings for our downstream businesses.

“We continue to progress our major capital projects,” he adds. “The recent decision to develop the Wheatstone LNG project represents a major milestone in the company’s efforts to commercialize our significant natural gas resource base in Australia. The Wheatstone and Gorgon LNG projects are expected to provide substantial new energy supplies to meet growing demand in the Asia-Pacific region.”

The Wall Street Journal adds a few other Q3 trends that bode well for CVX stock:

• Chevron has experienced three consecutive quarters of positive net income growth.

• Chevron has surpassed analyst expectations for each of the past four quarters.

• The company has seen revenues rise for three straight quarters.

Analysts aren’t completely convinced that Chevron can keep pulling a rabbit out of its hat every quarter. A group of analysts polled by The Journal see Q4 profits dropping from $3.40 per share to $3.20 per share.

But that’s one of the few wrinkles in what is starting to look like a clean, crisp and compelling stock performance outlook for Chevron. Investors are craving growth, and the oil sector is one that’s been giving it to them. Let’s break down the reasons why this -- and other trends -- favor CVX right now.

The bond market just can’t compete -- Investors are turning away from the bond market, where Treasury rate yields are at historic lows. Stocks are more attractive right now, and that’s helping public names that have a superior financial story -- just like Chevron.

Investors are slightly more bullish about the economy -- Increasingly, Chevron is seen by investors as a good stock to own (as investors view most oil stocks) as the economy emerges from recession. Why? Because oil stocks are widely seen as taking off once he economy is back on its feet. An added bonus: the dividend yield that oil companies routinely pay out (Chevron pays a forward annual dividend yield of 3.00%) is a highly sought after source of income for investors-- especially older ones who are looking for some asset protection but want to stay in equities and avoid the lousy rates of return on Treasury bonds and bank deposit rates.

Upstream growth -- Upstream earnings are off the charts for Chevron right now, rising 70% from the third quarter of 2010 to the third quarter of 2011. The company has especially profited from the run-up in oil prices, which has helped balance a 5% decline in output, mostly due to oilfield production fall-off and maintenance downtime. Chevron is no different than most oil producing giants in that production volumes are down this quarter, but company executives say they expect Chevron to hike oil production output by 1% over the next few years, and by 5% from 2014 through 2017. A good chunk of that production should come from two areas; in Western Australia (the Gorgon and Wheatstone projects) and the North Sea Claire project. Both sites should see the bulk of Chevron’s capital expenditures in 2012, but the payout after that should be a boost for Chevron stock.

Analysts at Trefis.com see Chevron shooting up to $109 per share, noting that Chevron is “well diversified in the energy sector, generating revenues from many sources [including] oil, natural gas, refining, etc.”

Trefis also notes that Chevron should benefit from an expected rise in demand for oil -- a commodity the firm calls a “must-have product.”

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Chevron key financial numbers:

· Current share price: $106.43

· The 52-week range is $80.41 to $110.01

· Earnings estimates for 2011: $13.57 per share

· Earnings estimates for 2012: $12.73 per share

  • Annual dividend: $3.42 per share which yields 3.1%

Source: Trefis.com

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Trefis sees most of Chevron’s stock performance coming out of its crude oil and natural liquefied gas production -- it pegs that division as comprising 49.0% of CVX’s stock price estimate.

The firm also says that Chevron’s upstream potential could be substantial -- upstream earnings rose from $3.6 billion in 2010 to $6.2 billion. A downbeat note comes from the company’s capital expenditure exposure, which Chevron officials have said will increase in 2012; it’s one area that could crimp stock performance during the short term.

But if Trefis is right, then even Chevron’s capital expenditure story shouldn’t get in the way of a stock run-up to $109 per share. And it shouldn’t get in the way of a stampede by growth-oriented, income-seeking investors.