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We expect integrated oil and gas company Occidental Petroleum Corporation (OXY - Analyst Report) to beat expectations when it reports fourth-quarter 2012 results on Jan 31, 2013.

Why a Likely Positive Surprise?

Our proven model shows that Occidental Petroleum is likely to beat earnings because it has the right combination of two key factors.

Positive Zacks ESP: Earnings Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.60%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #3 (Hold): The stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered while going into an earnings announcement.

The combination of Occidental Petroleum’s Zacks Rank #3 (Hold) and 0.60% ESP make us very confident in looking for a positive earnings beat on Jan 31, 2013.

What is Driving the Better Than Expected Earnings?

Occidental Petroleum’s well-diversified asset base, strong balance sheet and liquidity position, steady capital investment program, and cost cutting measures are expected to lead to a positive earnings surprise in the current quarter.

The positive trend is seen in the trailing four quarter average surprise of 2.33%. The company’s third-quarter 2012 surprise was 4.29% due to higher revenue from Midstream, Marketing and Other segments.

Other Stocks to Consider

Murphy Oil is not the only company looking up this earnings season. We also see likely earnings beat coming from other operators in the industry.

TransAtlantic Petroleum Ltd. (TAT - Snapshot Report), Earnings ESP of +100.00% and Zacks Rank #2 (Buy)

Valero Energy Corporation (VLO - Analyst Report), Earnings ESP of +5.98% and Zacks Rank #2 (Buy)

Exxon Mobil Corporation (XOM - Analyst Report), Earnings ESP of +1.01% and Zacks Rank #3 (Hold)

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