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Breaking Down Occidental Petroleum (OXY) Stock Before Earnings
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Occidental Petroleum’s (OXY - Free Report) third quarter earnings report on November 8 will be heavily covered with famed investor Warren Buffett controlling a significant stake in the company. With many notable energy and oil companies like Chevron (CVX - Free Report) and Exxon Mobil (XOM - Free Report) seeing their stocks rally after strong earnings reports, investors in OXY will be hoping for the same.
Basics
Trading near its 52-week high of $77.13 seen in August, a strong Q3 report could help the stock reach new highs. Oil prices have also remained near $90 a barrel making operating conditions favorable for the integrated oil and gas company.
OXY’s Oil and Gas-Integrated-United States Industry is in the top 31%, and its strong business and growth have catapulted the stock over the last year. Occidental Petroleum has significant exploration and production exposure and produces a variety of chemicals, petrochemicals, polymers, and specialty chemicals.
Image Source: Zacks Investment Research
Overview
Occidental Petroleum’s diversity is attractive to many shareholders including Buffett. The company is broken down into three segments: Oil & Gas, Chemical, and Midstream & Marketing.
The Oil and Gas segment explores, develops, produces, and markets crude oil, natural gas liquids (NGL), condensate, and natural gas with both domestic and international operations. The Chemical segment manufactures and markets polyvinyl chloride resins, chlorine, and caustic soda in the U.S., Canada, and Chile. Lastly, the Midstream and Marketing segment encompasses operations that gather, treat, process, transport, store, trade, and market crude oil, natural gas, NGL, condensates, and carbon dioxide.
Wall Street will be looking for further growth among the Chemical and Midstream Segments to show the company’s ability to separate itself as an elite player among integrated oil companies. Last quarter, OXY’s chemical segment income was $620 million, up 158% from Q2 2021, for the fourth consecutive quarter of record earnings. Occidental stated the increase was due to improved demand across most product lines. The Midstream and Marketing segment was also up at $247 million compared to a loss of -$3 million the prior year, driven by higher sulfur prices and sales volume. This helped the company beat earnings expectations by 8% at $3.16 per share.
Investors will surely hope the growth and diversification of Occidental Petroleum continues along with the company’s core Oil and Gas business which saw income up a stellar 645% to $3 billion in Q2.
Q3 Outlook
The Zacks Consensus Estimate for OXY’s Q3 earnings is $2.48 per share, which would represent a 185% increase from Q3 2021. However, earnings estimates for the period are significantly down from $2.78 at the beginning of the quarter. Sales for Q3 are expected to be up 37% at $9.35 billion.
Year over year, OXY earnings are now expected to rise 295% to $10.07, but dip -17% in FY23 at $8.29 per share after a tough-to-compete-with year. Sales are projected to be up 43% this year but decline -8% in FY23 at $34.76 billion. Occidental’s revenue is now well above its pre-covid levels, with 2019 sales at $20.91 billion.
Performance & Valuation
Year to date OXY is up +162% to crush the S&P 500’s -22% and its peer group’s +104%, which includes notable competitors Hess Corporation (HES - Free Report) and ConocoPhillips (COP - Free Report) . Taking a look at the stock’s post-pandemic performance, we can see OXY is up +522% to blast the benchmark when including its dividend in its total return. This is also near its peer group’s +549%.
Image Source: Zacks Investment Research
Trading around $75 per share, OXY has a forward P/E of 7.2X. This is nicely below the industry average of 12.2X. Even better, OXY trades at a discount to its high of 19.4X earlier in the year and near the median of 7X. Plus, despite OXY’s impressive performance this year the stock trades well below the benchmark’s 17.2X.
Image Source: Zacks Investment Research
Bottom Line
Like other oil and energy stocks that have already beaten Q3 expectations, a strong report could be a nice catalyst for OXY and lead to a sustained rally. OXY currently lands a Zacks Rank #3 (Hold). While Occidental Petroleum is expected to see continued growth, earnings estimates have gone down from the beginning of the quarter.
This makes an earnings beat even more significant for the stock along with the ability to show continued growth among its business segments. OXY offers investors a 0.71% annual dividend yield at $0.52 a share and long-term investors may be rewarded with the company in a top-rated industry and still appearing to trade at a discount despite oil prices remaining high.
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Breaking Down Occidental Petroleum (OXY) Stock Before Earnings
Occidental Petroleum’s (OXY - Free Report) third quarter earnings report on November 8 will be heavily covered with famed investor Warren Buffett controlling a significant stake in the company. With many notable energy and oil companies like Chevron (CVX - Free Report) and Exxon Mobil (XOM - Free Report) seeing their stocks rally after strong earnings reports, investors in OXY will be hoping for the same.
Basics
Trading near its 52-week high of $77.13 seen in August, a strong Q3 report could help the stock reach new highs. Oil prices have also remained near $90 a barrel making operating conditions favorable for the integrated oil and gas company.
OXY’s Oil and Gas-Integrated-United States Industry is in the top 31%, and its strong business and growth have catapulted the stock over the last year. Occidental Petroleum has significant exploration and production exposure and produces a variety of chemicals, petrochemicals, polymers, and specialty chemicals.
Image Source: Zacks Investment Research
Overview
Occidental Petroleum’s diversity is attractive to many shareholders including Buffett. The company is broken down into three segments: Oil & Gas, Chemical, and Midstream & Marketing.
The Oil and Gas segment explores, develops, produces, and markets crude oil, natural gas liquids (NGL), condensate, and natural gas with both domestic and international operations. The Chemical segment manufactures and markets polyvinyl chloride resins, chlorine, and caustic soda in the U.S., Canada, and Chile. Lastly, the Midstream and Marketing segment encompasses operations that gather, treat, process, transport, store, trade, and market crude oil, natural gas, NGL, condensates, and carbon dioxide.
Wall Street will be looking for further growth among the Chemical and Midstream Segments to show the company’s ability to separate itself as an elite player among integrated oil companies. Last quarter, OXY’s chemical segment income was $620 million, up 158% from Q2 2021, for the fourth consecutive quarter of record earnings. Occidental stated the increase was due to improved demand across most product lines. The Midstream and Marketing segment was also up at $247 million compared to a loss of -$3 million the prior year, driven by higher sulfur prices and sales volume. This helped the company beat earnings expectations by 8% at $3.16 per share.
Investors will surely hope the growth and diversification of Occidental Petroleum continues along with the company’s core Oil and Gas business which saw income up a stellar 645% to $3 billion in Q2.
Q3 Outlook
The Zacks Consensus Estimate for OXY’s Q3 earnings is $2.48 per share, which would represent a 185% increase from Q3 2021. However, earnings estimates for the period are significantly down from $2.78 at the beginning of the quarter. Sales for Q3 are expected to be up 37% at $9.35 billion.
Year over year, OXY earnings are now expected to rise 295% to $10.07, but dip -17% in FY23 at $8.29 per share after a tough-to-compete-with year. Sales are projected to be up 43% this year but decline -8% in FY23 at $34.76 billion. Occidental’s revenue is now well above its pre-covid levels, with 2019 sales at $20.91 billion.
Performance & Valuation
Year to date OXY is up +162% to crush the S&P 500’s -22% and its peer group’s +104%, which includes notable competitors Hess Corporation (HES - Free Report) and ConocoPhillips (COP - Free Report) . Taking a look at the stock’s post-pandemic performance, we can see OXY is up +522% to blast the benchmark when including its dividend in its total return. This is also near its peer group’s +549%.
Image Source: Zacks Investment Research
Trading around $75 per share, OXY has a forward P/E of 7.2X. This is nicely below the industry average of 12.2X. Even better, OXY trades at a discount to its high of 19.4X earlier in the year and near the median of 7X. Plus, despite OXY’s impressive performance this year the stock trades well below the benchmark’s 17.2X.
Image Source: Zacks Investment Research
Bottom Line
Like other oil and energy stocks that have already beaten Q3 expectations, a strong report could be a nice catalyst for OXY and lead to a sustained rally. OXY currently lands a Zacks Rank #3 (Hold). While Occidental Petroleum is expected to see continued growth, earnings estimates have gone down from the beginning of the quarter.
This makes an earnings beat even more significant for the stock along with the ability to show continued growth among its business segments. OXY offers investors a 0.71% annual dividend yield at $0.52 a share and long-term investors may be rewarded with the company in a top-rated industry and still appearing to trade at a discount despite oil prices remaining high.