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Occidental Petroleum Corporation (OXY - Analyst Report), a major integrated oil and gas exploration and production company, is scheduled to report its third-quarter 2012 financial results on October 25, 2012.

Second-Quarter Snapshot  

Occidental Petroleum reported its second-quarter 2012 operating earnings per share of $1.64, down 26.5% year over year from $2.23. This decline was primarily due to lower product pricing. However, the quarterly earnings surpassed the Zacks Consensus Estimate of $1.60 per share.

The company’s quarterly revenue decreased 6.6% to $5,768 million from $6,173 million in the year-ago quarter due to lower contribution from the Oil and Gas, Chemical and Midstream, Marketing and Other segments. The top line missed the Zacks Consensus Estimate of $5,958 million.

Zacks Consensus  

The Zacks Consensus Estimate for third-quarter 2012 is $1.68 per share, lower than $2.18 per share reported in the prior-year quarter. Currently, the Zacks Consensus Estimate for the aforementioned period’s earning ranges between $1.59 and $2.06 a share.

For full-year 2012, the Zacks Consensus Estimate stands at $7.06 per share, lower than the prior-year earnings of $8.39 per share. The current Zacks Consensus Estimate for full-year 2012 ranges from $6.68 to $7.69 per share.

Estimate Revisions Trend

Agreement

For third-quarter 2012, we have observed that, in last 7 days out of 15, none of the estimates have moved upwards, while 1 estimate went in the downward direction. Over the last 30 days, 4 estimates moved upwards whereas 7 estimates moved in the downward direction.

For full-year 2012, out of 18, 2 estimates followed upward trend whereas 3 estimates moved downwards in last 7 days. In last 30 days, 6 estimates moved upwards whereas 7 estimates followed downward trend.

Magnitude

In the last 7 days, the Zacks Consensus Estimate for third-quarter 2012 earnings per share increased by a penny to $1.68 from $1.67.

In the last 30 days, the Zacks Consensus Estimate for third-quarter 2012 earnings per share declined by 2 cents to $1.68 from $1.70.

In the last 7 days, the Zacks Consensus Estimate for full-year 2012 earnings per share rose by a penny to $7.06 from earlier projection of $7.05.

In the last 30 days, the Zacks Consensus Estimate for full-year 2012 earnings per share fell by a penny to $7.06 from earlier projection of $7.07.

Surprise History

With respect to earnings surprises, Occidental Petroleum has topped the Zacks Consensus Estimate in three quarters out of the last four quarters. Over the last four quarters, the surprise ranges from -0.52% to 11.79% with an average of 4.21%.

Our Recommendation

We view Occidental Petroleum as an organization with a strong balance sheet and liquidity position with a steady capital investment program. We believe that the company will generate steady production growth in the forthcoming quarters with its well-diversified asset base, which is located in different geographical territories particularly in the Middle East. In addition, Occidental Petroleum took few cost-cutting measures, including disposing of loss-making assets, production curtailment and planned shutdowns of few plants. We believe these steps will enable the company to improve its operating as well as financial performance in the forthcoming quarters.

However, Occidental Petroleum’s over-dependence on the crude oil prices movement is an important threat for its future financial performance. We are also skeptical about political instability, natural calamities, and risks related to oil exploration and production infrastructure damages, which might obstruct the company’s operations.

Occidental Petroleum Corporation currently has short-term Zacks #3 Rank (Hold rating).

Los Angeles-based Occidental Petroleum Corporation along with its subsidiaries engages in the exploration, development, production and marketing of crude oil, natural gas liquids and natural gas. The company has operations in the United States, Middle East/North Africa and Latin America. With a market capitalization of $69.27 billion, Occidental has 11,300 full time employees. The company competes with ConocoPhillips (COP - Analyst Report).

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