Occidental Outperforms Industry in the Past Year: Time to Buy or Wait?
Occidental Petroleum Corporation’s OXY shares have gained 73.9% in the past year compared with the Zacks Oil and Gas-Integrated-United States industry’s rise of 53.4%. The company has also outperformed the Zacks Oil-Energy sector and the S&P 500 composite’s return in the same time period.
Occidental Petroleum is a low-cost producer with strong exposure to the Permian Basin and well-positioned to benefit from rising oil prices amid the ongoing Middle East crisis.
The company also operates internationally and has some presence in the region. However, none of its operations rely on the Strait of Hormuz for oil transportation, giving the company an additional strategic advantage.
Price Performance (One Year)
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Another operator in the same industry, ConocoPhillipsCOP, has low-risk and cost-effective operations spread across North America, Asia, Australia and Europe. ConocoPhillips’ shares have gained 59.3% in the past year.
Should you consider adding OXY stock to your portfolio only based on positive price movements? Let’s delve deeper and find out the factors that can help investors decide whether it is a good entry point to add OXY stock to their portfolio.
Growth Catalysts Strengthening Occidental’s Outlook
Occidental Petroleum benefits from its position as a low-cost operator with high-quality assets across multiple regions. This gives OXY a competitive edge over its peers. The company’s strong cost discipline is expected to support its performance, with plans to achieve $500 million in sustainable cost reductions by 2026. Since 2023, OXY has already delivered about $2 billion in annualized savings across its U.S. onshore operations, strengthening cash flow and improving margins.
Occidental Petroleum has benefited from its continued focus on the Permian Basin and is expanding its presence in the region through acquisitions. The purchase of CrownRock L.P. is expected to further strengthen and expand its operations in the basin. The company also has nearly a decade of high-return drilling inventory in the Permian under current economic and technical conditions. Production from the CrownRock assets is likely to support growth in Occidental Petroleum’s overall output.
Permian Basin assets continue to be a key contributor to Occidental Petroleum’s production. Permian output is projected at 766-786 thousand barrels of oil equivalent per day (“Mboe/d”), while total company production is expected at 1,440-1,480 Mboe/d in first-quarter 2026. For 2026, Occidental Petroleum plans to bring online 460-510 wells in the Permian region and 150-170 wells in the Rockies region, which is likely to boost production volumes.
Occidental Petroleum has been divesting its non-core assets and is utilizing the proceeds to reduce its long-term debts. The company has been successful in repaying debts worth $13.9 billion in the past 20 months, reducing annual interest expenses by $740 million.
Occidental Petroleum’s Earnings Estimates Are Going Up
The Zacks Consensus Estimate for Occidental Petroleum’s 2026 and 2027 earnings per share indicates an increase of 376.92% and 119.29%, respectively, in the past 60 days.
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The Zacks Consensus Estimate for ConocoPhillips’ 2026 and 2027 earnings per share indicates an increase of 60.31% and 17.76%, respectively, in the past 60 days.
OXY Stock’s Earnings Surprise History
The stable performance of the company allowed its earnings to surpass estimates in each of the past four quarters, the average surprise being 38.74%.
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Another company, EOG Resources Inc. EOG, focuses on exploring and producing crude oil, natural gas and NGLs, with most of its operations centered in U.S. oil-rich resource plays, alongside a smaller presence in Trinidad. EOG’s earnings also surpassed estimates in the past four quarters, resulting in an average surprise of 6.11%.
Occidental Petroleum’s ROE Lower Than the Industry
Return on equity (“ROE”) is a key indicator of a company’s financial performance. It reflects how effectively a corporation uses shareholders' equity to generate profits and is widely regarded as a measure of profitability and operational efficiency.
Occidental Petroleum’s ROE is lower than the industry average in the trailing 12 months. ROE of OXY was 9.89% compared with the industry average of 11.45%.
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OXY’s Shares Are Trading at a Premium
Occidental Petroleum’s shares are currently expensive on a relative basis, with the current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA TTM) being 7.36X compared with its industry average of 5.75X.
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EOG Resources is currently trading at an EV/EBITDA TTM of 7.11X, a premium to its sector’s average of 6.79X.
Summing Up
Occidental Petroleum’s focus on debt reduction, backed by strong domestic operations and synergies from recent acquisitions, is expected to enhance its overall performance. Rising oil prices further strengthen the outlook for this low-cost producer.
The company continues to face challenges from the highly competitive industry and its ROE is presently lower than the industry.
Despite certain challenges, this Zacks Rank #1 (Strong Buy) stock remains appealing due to its robust U.S. operations and significant presence in the resource-rich Permian Basin. With rising earnings estimates, the stock shows strong performance potential, making it a compelling addition to investors’ portfolios.
You can see the complete list of today’s Zacks #1 Rank stocks here.
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