Is Occidental Petroleum Corp. a Good Oil & Gas Stock to Buy?

NYSE: OXY | Occidental Petroleum Corporation  News, Ratings, and Charts

OXY – The shares of international energy company Occidental Petroleum’s (OXY) have rallied 94.3% in price year-to-date as U.S. crude oil prices hit multi-year highs with OPEC+ sticking with its output increase plan. However, given the surprising rise in crude inventories and the risk of a fourth wave of COVID-19 hitting several countries, the energy space is expected to remain volatile. So, will the stock be able to maintain its momentum? Let’s find out.

Oil and gas company Occidental Petroleum Corporation (OXY) in Houston, Tex., conducts exploration and production activities in the United States. The energy company’s strong operational performance in its last reported quarter helped generate its highest level of free cash flow for the second consecutive quarter in a decade. So far this year, the stock has surged 94.3% in price as the demand for petroleum products rebounded.

Furthermore, oil prices hit a three-year peak on October 4 after OPEC+ confirmed it would stick to its policy of increasing output gradually. OXY’s continued improvement in average global production should position it to capitalize on the growing demand.

However, an unexpected increase in U.S. crude inventories has caused oil prices to decline recently. And even though investors’ increasing risk-tolerance in the energy space bodes well for the stock, concerns related to the volatility in crude oil prices and Hurricane Ida-induced oil production losses could lead to OXY suffering a price pullback in the near term.

Here’s what could influence OXY’s performance in the coming months:

Volatility in Energy Industry

The price of Brent crude oil fell 0.2%, to $80.92 per barrel, on October 7, extending its losses from the previous session and pulling back from multi-year highs as the United States considers selling oil from its strategic reserves and Russia announced that it could stabilize the natural gas market to help cool off the surge in prices. Moreover, the surprising increase in U.S. crude inventories could weigh on prices.

An OPEC+ source recently said that the oil market is still “fragile” and there is “no guarantee” of stability in crude prices. In addition, fears surrounding the fourth wave of COVID-19, which could threaten the global demand and pace of economic recovery, might further trigger volatility in the energy sector. This could add to investors’ concerns surrounding OXY.

Mixed Growth Estimates

Analysts expect OXY’s revenues to increase 87.9% in the next quarter (ending December 2021) and 51.2% in the current year. But it is estimated to decline 1% in its fiscal year 2022. The company’s EPS is expected to rise 176.9% year-over-year to $0.6 next quarter and 134.8% from its year-ago value to $1.36 in 2021. However, OXY’s EPS is expected to decline at a 5.2% rate per annum over the next five years.

Robust Financials

OXY’s non-GAAP operating cash flow before working capital rose 361.7% year-over-year to $2.71 billion in the second quarter, ended June 30, 2021. The company’s net sales for the quarter totaled $6.01 billion, up 101.9% from the year-ago value. Furthermore, its cash and cash equivalents came in at $4.77 billion, representing a 292.9% increase from the prior-year quarter. In addition, OXY’s non-GAAP free cash flow stood at $2.01 billion, up 849.1% year-over-year.

Bullish Analyst Sentiment

Of the 24 Wall Street analysts that provided ratings for the stock, 11 rated it Buy, and 13 rated it Hold. A $34.4 consensus price target represents a 2.3% potential upside from yesterday’s $33.63 closing price.

POWR Ratings Reflect Uncertainty

OXY has an overall C rating, which translates to Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight different categories. OXY has a C grade for Quality. The stock’s negative ROE and ROA of 47.2% and 5.9%, respectively, are in sync with this grade.

Moreover, the company has a D Stability grade, which is in sync with a relatively high 2.34 beta. In terms of Momentum Grade, OXY has an A. The stock’s price return year-to-date is consistent with the grade.

In addition to the grades I’ve highlighted, one can check out additional OXY ratings for Growth, Value, and Sentiment here. OXY is ranked #24 of 89 stocks in the C-rated Energy – Oil & Gas industry.

Note that OXY is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.

Bottom Line

OXY’s stock price has surged significantly year-to-date on the back of a massive increase in oil prices, gradual demand recovery, and OPEC+’s decision to raise production. However, fears surrounding the fourth wave of COVID-19 in several countries and a larger-than-expected rise in the U.S. crude stockpile could lead to a fall in oil prices. This might cause the oil and gas company’s shares to retreat in the coming months. So, we think investors should wait for the situation to stabilize before investing in the stock.

How Does Occidental Petroleum Corporation (OXY) Stack Up Against its Peers?

While OXY has an overall C (Neutral) rating in our proprietary rating system, one might want to consider taking a look at its industry peers, SilverBow Resources, Inc. (SBOW) and Apache Corporation (APA), having an A (Strong Buy) rating.

Note that SBOW is one of the few stocks handpicked by our Chief Value Strategist, David Cohne, currently in the POWR Value portfolio. Learn more here.

Want More Great Investing Ideas?

3 Stocks to DOUBLE This Year

2022 Stock Market Outlook

9 “Must Own” Growth Stocks

How to Beat the Market the Rest of the Year?

 


OXY shares were trading at $34.56 per share on Monday morning, up $0.93 (+2.77%). Year-to-date, OXY has gained 99.87%, versus a 18.85% rise in the benchmark S&P 500 index during the same period.


About the Author: Imon Ghosh


Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
OXYGet RatingGet RatingGet Rating
SBOWGet RatingGet RatingGet Rating
APAGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

10 Best POWR Ratings Stocks

Investors love using our POWR Ratings to track down stocks likely to outperform the S&P 500 (SPY). However, on any given day there are over 1,300 that are Buy rated. This leads customers to reach out to us to discover which are the BEST of these stocks. Today I share the answer including details on the current 10 best POWR Ratings stocks. Get the rest below...

:  |  News, Ratings, and Charts

Are Stocks Ready to Break to New Highs?

The stock market (SPY) is on a 5 day winning streak and now less than 1% away from the all time highs. This quickly shakes off weeks of painful pullbacks and volatility. Is the market truly ready to ascend to new heights or is this another fake out before the next leg lower? Find out the rest below...

:  |  News, Ratings, and Charts

TTSH is this Week’s Featured Stock 

The Tile Shop Holdings (TTSH) is a leading specialty retailer of manufactured and natural stone tiles. The company has staged an impressive earnings turnaround. Read more to find out why the stock is a good buy into year-end.

:  |  News, Ratings, and Charts

Buy These 3 Tech Stocks Before They Soar Further

Tech stocks, which were underperformers at the start of the year, have made their way back as investors have been buying on the dip. Many of these stocks, which include Applied Materials Inc. (AMAT), KLA Corporation (KLAC), and Amdocs Limited (DOX) are currently in an uptrend and are expected to continue this momentum.

:  |  News, Ratings, and Charts

TTSH is this Week’s Featured Stock 

The Tile Shop Holdings (TTSH) is a leading specialty retailer of manufactured and natural stone tiles. The company has staged an impressive earnings turnaround. Read more to find out why the stock is a good buy into year-end.

Read More Stories

More Occidental Petroleum Corporation (OXY) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All OXY News