Occidental Petroleum Corporation OXY is trading above its 50-day simple moving average (SMA), signaling a bullish trend. The company is gaining from its focus on the Permian Basin and contribution from acquired assets.
The company operates in a very competitive industry, but Occidental, being a low-cost operator and possessing high-quality assets in different locations across the globe, has a competitive advantage over its peers.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
OXY’s 50-Day SMA Chart
Image Source: Zacks Investment Research
The 50-day SMA is a key indicator for traders and analysts to identify support and resistance levels. It is considered particularly important as it is the first marker of a stock’s uptrend or downtrend.
Occidental has rallied 13.7% in the past month, outperforming its industry, sector and Zacks S&P 500 Composite’s return in the same time frame. Occidental's shares have outperformed another operator, Hess HES, in the same period. HES shares have gained 11.4% in the past month.
Price Performance (One Month)
Image Source: Zacks Investment Research
Should you consider adding OXY stock to your portfolio only based on positive price movements? Let’s delve deeper and find out factors that can help investors decide whether it is a good entry point to add OXY stock to their portfolio.
Factors Acting as Tailwind for Occidental
Occidental's persistent focus on Permian resources has been beneficial. Its core development area in the Permian region has been recording solid results. Occidental strengthened its portfolio by adding CrownRock's assets in the Midland Basin. Courtesy of CrownRock's contribution, the company has revised its production volume upward. Occidental has raised its fourth-quarter production Permian volume by 12,000 barrels per day, 9,000 of which are coming from its CrownRock assets.
Occidental continues to evaluate its high-quality asset portfolio for divestment opportunities and will apply those proceeds to further debt reduction, thereby strengthening its balance sheet. Courtesy of strong free cash flow, it has repaid nearly $4 billion in debt during the third quarter of 2024, which is nearly 90% of its near-term debt reduction target of $4.5 billion. Ongoing debt reduction will reduce its capital servicing expenses.
Occidental, being a low-cost operator with high-quality assets in different locations across the globe, has a competitive advantage over its peers. Efficient cost management is also going to boost its performance. Systematic capital investment has been allowing the company to strengthen its infrastructure. In the first nine months of 2024, OXY invested $5.09 billion compared with $4.72 billion in the year-ago period.
The company is also expanding its operation internationally. Occidental has entered a new 25-year production-sharing agreement with Sonatrach in Algeria. The production-sharing agreement renews and strengthens operations in Algeria. Production from the International operation is expected in the range of 228-234 Mboe/d in fourth-quarter 2024.
OXY Stock’s Earnings Surprise History
Courtesy of the positive initiatives, Occidental beat earnings estimates in all the last four quarters, resulting in an average surprise of 18.71%. The company's operational excellence, paired with a high-quality asset portfolio, allows it to deliver strong performance.
Image Source: Zacks Investment Research
Headwinds for Occidental Stock
Fluctuations in demand and volatile global and local commodity prices affect Occidental’s results of operations. The company remains exposed to fluctuating commodity market prices, and as of Dec. 31, 2023, there were no active commodity hedges in place. If commodity prices drop substantially from their current level, it will impact Occidental’s performance.
Occidental’s ROE Lower Than the Industry
Occidental’s return on equity (ROE) is lower than the industry average in the trailing 12 months. ROE of OXY was 15.98% compared with the industry average of 18.96%.
Image Source: Zacks Investment Research
Occidental Trading at a Premium
Occidental shares are currently trading at a premium compared to its industry. OXY’s current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA) is 6.04X compared with the industry average of 4.96X. It indicates that the company is presently marginally overvalued compared to its industry.
Image Source: Zacks Investment Research
Occidental in a Nutshell
Occidental’s focus on the Permian region, accretive acquisition and strength in global operations will boost performance.
Yet, exposure to commodity price fluctuation, premium valuation and lower return compared with the industry also do not make a strong case for the company.
Despite the headwinds, it is advisable to keep this Zacks Rank #3 (Hold) stock in your portfolio, given its strong exposure to the prolific Perman Basin. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Research Chief Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners UpHess Corporation (HES) : Free Stock Analysis Report
Occidental Petroleum Corporation (OXY) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
