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OXY Stock Underperforms its Industry in a Year: How Should You Play?
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Occidental Petroleum’s (OXY - Free Report) share price has dropped 25.2% in the trailing 12 months, wider compared with its industry’s decline of 15.7%. In the same period, the Zacks Oil & Energy sector has declined 0.9%.
OXY’s exposure to fluctuating commodity prices remains a concern. As of Dec. 31, 2024, there were no active commodity hedges in place, so if the commodity prices drop substantially, it can adversely impact Occidental’s performance.
Price Performance (One Year)
Image Source: Zacks Investment Research
Should you consider adding OXY stock to your portfolio only based on the softness in share prices? Let’s delve deeper and find out factors that can help investors decide whether it is a good entry point to add OXY stock to their portfolio.
Factors Acting as Tailwind for OXY Stock
Occidental’s top priority is to strengthen its balance sheet and lower capital servicing expenses. In 2024, the company achieved its near-term debt reduction target of $4.5 billion seven months ahead of schedule. Occidental intends to use its free cash flow and proceeds from non-core asset divestiture to redeem its outstanding debts to strengthen its balance sheet.
Occidental, being a low-cost operator and possessing high-quality assets in different locations across the globe, has a competitive advantage over its peers. Efficient cost management is also expected to boost the performance of the company. The systematic capital investment has allowed the company to strengthen its infrastructure. OXY, to expand its existing operations, aims to invest in the range of $7.4-$7.6 billion in 2025.
Occidental is also expanding its operation internationally. Production from the International operation is expected in the range of 226-236 thousand barrels of oil equivalent per day (Mboe/d) in 2025.
Occidental’s production volumes in 2025 are expected to remain strong thanks to strong performance from its international and domestic operations. Occidental is set to bring online 500-550 company-operated wells in the Permian region and 100-120 wells in the Rockies region in 2025, which will further boost the company's domestic onshore production.
Strategic acquisitions of prime assets continue to boost Occidental's production volumes. Acquired CrownRock assets will assist OXY in increasing production volumes, lowering well costs and accelerating returns. Production from the CrownRock asset is expected to touch 170,000 Boe per day in 2025 and lower well costs by more than 15% in 2025 from 2023 levels.
Headwinds for Occidental Stock
Fluctuations in demand and volatile global and local commodity prices affect Occidental’s results of operations. The company remains exposed to fluctuating commodity market prices, and as of Dec. 31, 2024, there were no active commodity hedges in place. If commodity prices drop substantially from their current level, it will impact OXY’s performance.
Occidental’s ROE Lower Than the Industry
Occidental’s return on equity (ROE) is lower than the industry average in the trailing 12 months. ROE of OXY was 16.33% compared with the industry average of 17.63%.
Image Source: Zacks Investment Research
Devon Energy (DVN - Free Report) , operating in the same sector, is currently having ROE higher than its industry.
OXY’s Shares Are Trading at a Premium
Occidental’s shares are currently expensive on a relative basis, with its current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA TTM) being 5.61X compared with its industry average of 5.09X.
Image Source: Zacks Investment Research
OXY’s Sales Estimates are Moving South
The Zacks Consensus Estimate for Occidental’s 2025 and 2026 earnings per share has moved up 9.4% and 1.94%, year over year, respectively.
Image Source: Zacks Investment Research
OXY Stock’s Earnings Surprise History
Occidental beat earnings estimates in all the last four quarters, resulting in an average surprise of 23.56%. The company's operational excellence, paired with a high-quality asset portfolio, allows it to deliver strong performance.
Image Source: Zacks Investment Research
Wrapping Up
Occidental’s focus on lowering debts, strength in its domestic and global operations, and contribution from acquired assets will boost performance.
However, exposure to commodity price fluctuations and returns lower than the industry are challenges for the company.
Despite the headwinds, it is advisable to keep this Zacks Rank #3 (Hold) stock in your portfolio, given its strong domestic operations and exposure to the prolific Permian Basin.
Image: Bigstock
OXY Stock Underperforms its Industry in a Year: How Should You Play?
Occidental Petroleum’s (OXY - Free Report) share price has dropped 25.2% in the trailing 12 months, wider compared with its industry’s decline of 15.7%. In the same period, the Zacks Oil & Energy sector has declined 0.9%.
OXY’s exposure to fluctuating commodity prices remains a concern. As of Dec. 31, 2024, there were no active commodity hedges in place, so if the commodity prices drop substantially, it can adversely impact Occidental’s performance.
Price Performance (One Year)
Image Source: Zacks Investment Research
Should you consider adding OXY stock to your portfolio only based on the softness in share prices? Let’s delve deeper and find out factors that can help investors decide whether it is a good entry point to add OXY stock to their portfolio.
Factors Acting as Tailwind for OXY Stock
Occidental’s top priority is to strengthen its balance sheet and lower capital servicing expenses. In 2024, the company achieved its near-term debt reduction target of $4.5 billion seven months ahead of schedule. Occidental intends to use its free cash flow and proceeds from non-core asset divestiture to redeem its outstanding debts to strengthen its balance sheet.
Occidental, being a low-cost operator and possessing high-quality assets in different locations across the globe, has a competitive advantage over its peers. Efficient cost management is also expected to boost the performance of the company. The systematic capital investment has allowed the company to strengthen its infrastructure. OXY, to expand its existing operations, aims to invest in the range of $7.4-$7.6 billion in 2025.
Occidental is also expanding its operation internationally. Production from the International operation is expected in the range of 226-236 thousand barrels of oil equivalent per day (Mboe/d) in 2025.
Occidental’s production volumes in 2025 are expected to remain strong thanks to strong performance from its international and domestic operations. Occidental is set to bring online 500-550 company-operated wells in the Permian region and 100-120 wells in the Rockies region in 2025, which will further boost the company's domestic onshore production.
Strategic acquisitions of prime assets continue to boost Occidental's production volumes. Acquired CrownRock assets will assist OXY in increasing production volumes, lowering well costs and accelerating returns. Production from the CrownRock asset is expected to touch 170,000 Boe per day in 2025 and lower well costs by more than 15% in 2025 from 2023 levels.
Headwinds for Occidental Stock
Fluctuations in demand and volatile global and local commodity prices affect Occidental’s results of operations. The company remains exposed to fluctuating commodity market prices, and as of Dec. 31, 2024, there were no active commodity hedges in place. If commodity prices drop substantially from their current level, it will impact OXY’s performance.
Occidental’s ROE Lower Than the Industry
Occidental’s return on equity (ROE) is lower than the industry average in the trailing 12 months. ROE of OXY was 16.33% compared with the industry average of 17.63%.
Image Source: Zacks Investment Research
Devon Energy (DVN - Free Report) , operating in the same sector, is currently having ROE higher than its industry.
OXY’s Shares Are Trading at a Premium
Occidental’s shares are currently expensive on a relative basis, with its current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA TTM) being 5.61X compared with its industry average of 5.09X.
Image Source: Zacks Investment Research
OXY’s Sales Estimates are Moving South
The Zacks Consensus Estimate for Occidental’s 2025 and 2026 earnings per share has moved up 9.4% and 1.94%, year over year, respectively.
Image Source: Zacks Investment Research
OXY Stock’s Earnings Surprise History
Occidental beat earnings estimates in all the last four quarters, resulting in an average surprise of 23.56%. The company's operational excellence, paired with a high-quality asset portfolio, allows it to deliver strong performance.
Image Source: Zacks Investment Research
Wrapping Up
Occidental’s focus on lowering debts, strength in its domestic and global operations, and contribution from acquired assets will boost performance.
However, exposure to commodity price fluctuations and returns lower than the industry are challenges for the company.
Despite the headwinds, it is advisable to keep this Zacks Rank #3 (Hold) stock in your portfolio, given its strong domestic operations and exposure to the prolific Permian Basin.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.