The oil and energy sector might be one of the areas of the economy that posts standout growth in 2023.
BP (BP - Free Report) and Occidental Petroleum (OXY - Free Report) are two stocks that investors may be considering for next year. Let’s see which oil and energy stock is the better buy at the moment.
Synopsis
Higher oil prices over the last two years have caused many oil and gas stocks to soar as these companies have been very profitable.
BP has been able to profit from oil production, but it is also positioning itself to capitalize on the global economy’s transition to lower carbon fuels. To that note, BP has committed to becoming carbon-neutral by 2050.
Occidental Petroleum has diversified businesses as well. Like BP, Occidental Petroleum operates as an integrated oil and gas company and also produces a variety of basic materials, petrochemicals, polymers, and special chemicals.
Performance & Valuation
OXY shares are up +115% vs. BP’s +30% in 2022. Both stocks have crushed the S&P 500’s -21%. Over the last two years, OXY’s total return is now +264% to top BP’s +83% and the benchmark’s +4%.
From a valuation standpoint, BP and Occidental Petroleum stocks stand out despite their stellar performances in recent years. Warren Buffett has notably added to positions in Occidental Petroleum throughout the year. Yet BP stock might appear even more attractive.
Shares of BP trade at just 3.9X forward earnings with OXY trading at a 6.6X forward earnings multiple. BP’s valuation is very intriguing considering the stock trades at $34 per share and roughly half the price of OXY at $62 a share. Even better, BP is enjoying favorable earnings estimate revisions.
Growth & Outlook
BP earnings are expected to climb 135% in 2022 at $8.98 per share. This is up significantly from estimates of $8.48 a share 90 days ago. Fiscal 2023 earnings are projected to drop -26% after an extremely tough-to-follow year. Earnings estimates are slightly up from the beginning of the quarter.
On the top line, BP sales are projected to jump 45% this year and rise 6% in FY23 to $252.96 billion. FY23 sales are closing in on pre-pandemic levels and only 10% below 2019 sales of $282.61 billion.
Looking at Occidental Petroleum, earnings are forecasted to climb 279% in 2022 at $9.68 per share. Earnings estimates have gone down from $10.93 a share last quarter. Fiscal 2023 earnings are expected to decline -25% after an exceptional year. FY23 earnings estimates have also declined.
Sales are projected to climb 42% this year and decline -10% in FY23 at $33.75 billion. Impressively, FY23 would still represent a 65% increase from 2019 sales of $20.39 billion.
Dividends
Oil & Energy stocks are renowned for their stellar dividends, especially when business is strong. In this regard, BP has the edge with its very strong 4.06% annual dividend yield compared to OXY’s 0.81%.
Bottom Line
BP stock appears to be the better buy over Occidental Petroleum at the moment. BP lands a Zacks Rank #2 (Buy) in correlation with rising earnings estimate revisions for FY22 and FY23. In contrast, OXY stock lands a Zacks Rank #3 (Hold) as the earnings outlook and top line growth are still impressive but earnings estimates have trended down.
Both companies do appear to be strong long-term investments considering their current valuations and the ability to not depend solely on oil prices with diversity among their businesses.
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The oil and energy sector might be one of the areas of the economy that posts standout growth in 2023.
BP (BP - Free Report) and Occidental Petroleum (OXY - Free Report) are two stocks that investors may be considering for next year. Let’s see which oil and energy stock is the better buy at the moment.
Synopsis
Higher oil prices over the last two years have caused many oil and gas stocks to soar as these companies have been very profitable.
BP has been able to profit from oil production, but it is also positioning itself to capitalize on the global economy’s transition to lower carbon fuels. To that note, BP has committed to becoming carbon-neutral by 2050.
Occidental Petroleum has diversified businesses as well. Like BP, Occidental Petroleum operates as an integrated oil and gas company and also produces a variety of basic materials, petrochemicals, polymers, and special chemicals.
Performance & Valuation
OXY shares are up +115% vs. BP’s +30% in 2022. Both stocks have crushed the S&P 500’s -21%. Over the last two years, OXY’s total return is now +264% to top BP’s +83% and the benchmark’s +4%.
From a valuation standpoint, BP and Occidental Petroleum stocks stand out despite their stellar performances in recent years. Warren Buffett has notably added to positions in Occidental Petroleum throughout the year. Yet BP stock might appear even more attractive.
Shares of BP trade at just 3.9X forward earnings with OXY trading at a 6.6X forward earnings multiple. BP’s valuation is very intriguing considering the stock trades at $34 per share and roughly half the price of OXY at $62 a share. Even better, BP is enjoying favorable earnings estimate revisions.
Growth & Outlook
BP earnings are expected to climb 135% in 2022 at $8.98 per share. This is up significantly from estimates of $8.48 a share 90 days ago. Fiscal 2023 earnings are projected to drop -26% after an extremely tough-to-follow year. Earnings estimates are slightly up from the beginning of the quarter.
On the top line, BP sales are projected to jump 45% this year and rise 6% in FY23 to $252.96 billion. FY23 sales are closing in on pre-pandemic levels and only 10% below 2019 sales of $282.61 billion.
Looking at Occidental Petroleum, earnings are forecasted to climb 279% in 2022 at $9.68 per share. Earnings estimates have gone down from $10.93 a share last quarter. Fiscal 2023 earnings are expected to decline -25% after an exceptional year. FY23 earnings estimates have also declined.
Sales are projected to climb 42% this year and decline -10% in FY23 at $33.75 billion. Impressively, FY23 would still represent a 65% increase from 2019 sales of $20.39 billion.
Dividends
Oil & Energy stocks are renowned for their stellar dividends, especially when business is strong. In this regard, BP has the edge with its very strong 4.06% annual dividend yield compared to OXY’s 0.81%.
Bottom Line
BP stock appears to be the better buy over Occidental Petroleum at the moment. BP lands a Zacks Rank #2 (Buy) in correlation with rising earnings estimate revisions for FY22 and FY23. In contrast, OXY stock lands a Zacks Rank #3 (Hold) as the earnings outlook and top line growth are still impressive but earnings estimates have trended down.
Both companies do appear to be strong long-term investments considering their current valuations and the ability to not depend solely on oil prices with diversity among their businesses.
Just Released: Zacks Top 10 Stocks for 2024
Hurry – you can still get in early on our 10 top tickers for 2024. Hand-picked by Zacks Director of Research, Sheraz Mian, this portfolio has been stunningly and consistently successful. From inception in 2012 through November, 2023, the Zacks Top 10 Stocks gained +974.1%, nearly TRIPLING the S&P 500’s +340.1%. Sheraz has combed through 4,400 companies covered by the Zacks Rank and handpicked the best 10 to buy and hold in 2024. You can still be among the first to see these just-released stocks with enormous potential.
See New Top 10 Stocks >>
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