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Occidental (OXY) Down 5% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Occidental Petroleum (OXY - Free Report) . Shares have lost about 5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Occidental due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Occidental Q3 Earnings & Revenues Surpass Estimates

Occidental Petroleum Corporation reported third-quarter 2018 earnings of $1.77 per share, surpassing the Zacks Consensus Estimate of $1.51 by 17.2%. In the year-ago quarter, the company’s bottom line came in at 18 cents per share.

Total Revenues

Occidental Petroleum's total revenues were $6,176 million, beating the Zacks Consensus Estimate of $4,661 million by 32.5%. Also, the top line soared 72.1% year over year from $3,588 million.

This year-over-year improvement in total revenues was owing to an increased production from Permian Resources, which surged 60% year over year coupled with revenue growth from Midstream & Marketing segment.

Production & Sales

Occidental Petroleum’s average daily net oil, liquids and gas production volume expanded to 681,000 barrels of oil equivalent per day (boe/d), up from 600,000 boe/d in the prior-year quarter. This improvement in the production volume was backed by higher drilling activity and a solid output in the Permian Resources region.

Occidental Petroleum’s production in the third quarter was within the company’s guidance of 665,000-687,000 boe/d. Also, Permian Resource’s production of 225,000 boe/d was at the upper end of the projection of 215,000-225,000 boe/d, provided by the company.

In the quarter under review, total sales volume was 696,000 boe/d compared with 600,000 boe/d recorded in the year-ago period.

Realized Prices

Realized prices for crude oil in the third quarter rose 35.7% year over year to $62.67 per barrel worldwide.

Worldwide realized NGL prices increased 42.6% to $29.55 per barrel.

However, worldwide natural gas prices were down 9.3% to $1.62 per thousand cubic feet.

Highlights of the Release

Pre-tax income from its Chemical Segment in the third quarter was $321 million, up 60.5% year over year and above the view of $315 million.

Midstream and Marketing segment’s adjusted pre-tax income was $796 million, up from the year-over-year figure of $4 million. This uptick was courtesy of higher earnings derived in the segment from an improved crude oil spread.

Financial Position

As of Sep 30, 2018, Occidental Petroleum had cash and cash equivalents of $2,954 million compared with $1,672 million as of Dec 31, 2017.

As of Sep 30, 2018, the company had long-term debt (net of current portion) of $10,198 million compared with $9,328 million as of Dec 31, 2017.

In the third quarter of 2018, cash from operations was $2,404 million, up 121.4% from $1,086 million in the prior-year period.

In third-quarter 2018, Occidental Petroleum’s total capital expenditure was $1,319 million, higher than $947 million invested in the year-ago quarter.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -12.83% due to these changes.

VGM Scores

At this time, Occidental has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Occidental has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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