Occidental Petroleum CorporationOXY, a Zacks Rank #1 (Strong Buy) stock, has been a substantial beneficiary from the energy surge over the past year. The company sports a ‘B’ rating for our Zacks Growth Style Score, indicating a strong likelihood that the stock continues to propel higher on the heels of strong earnings and sales growth.
Occidental Petroleum is vastly outperforming the market this year and looks to build on the recent momentum. After becoming extremely undervalued back when the coronavirus outbreak initially struck, the stock has surged more than 700% since the pandemic-induced market plunge back in March of 2020 and continues to make a series of new 52-week highs.
OXY is a component of the Zacks Oil and Gas – Integrated – United States industry, which ranks in the top 10% out of approximately 250 industry groups. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform over the next 3 to 6 months. This industry has risen nearly 70% year-to-date while the market has been in correction mode.
Quantitative research studies have shown that approximately half of a stock’s future price appreciation can be attributed to its industry grouping. By targeting stocks located within leading industries, we can dramatically improve our odds of success. Also note the favorable characteristics for this industry below:
Company Description
Occidental Petroleum is engaged in the acquisition and exploration of oil and gas properties globally. The company develops and produces oil and condensate, natural gas liquids, and natural gas, in addition to transporting and storing carbon dioxide. OXY also produces a variety of basic chemicals, petrochemicals, and polymers. Occidental Petroleum was founded in 1920 and is headquartered in Houston, TX.
Recent Earnings and Future Estimates
OXY has surpassed earnings estimates in each of the past four quarters, delivering an average earnings surprise of 26.17%. The energy provider most recently reported first-quarter EPS earlier this month of $2.12, a 7.61% surprise over the $1.97 consensus estimate. Revenues of $8.53 billion also surpassed estimates by 7.2% and improved 55.7% versus the same quarter in the prior year.
The company has been on the receiving end of several positive earnings estimate revisions as of late. For the current quarter, analysts have revised EPS estimates upward by 112.98 % in the past 60 days. The Q2 Zacks Consensus Estimate now stands at $2.79, reflecting an astounding 771.88% growth rate relative to Q2 of last year.
It’s a similar story when we zoom out and view full-year figures. Analysts have increased their 2022 EPS estimates by 88.43% in the past 60 days. The Zacks Consensus Estimate is now $9.93, translating to potential growth of 289.41% versus last year. Revenues are anticipated to rise 41.88% to $37.34 billion. Clearly, the sales and earnings trends point to continued growth for OXY.
Charting the Course
OXY is showing signs of relative strength and has advanced over 145% this year alone. The stock is hitting a series of new 52-week highs, serving as a sign of strength and indicating that institutional buying remains solid.
Only stocks that are in extremely powerful uptrends are able to weather bear markets and corrections so gracefully. This is the kind of stock we want to include in our portfolio – one with both strong fundamentals as well as technicals. The stock has trended very well over the last 12 months, and we can see below that the 200-day moving average (blue line) served as support throughout the majority of last year.
The moving average line is sloping up and the stock continues to surge. Cautious investors may feel hesitant about investing in a stock that has come this far, but the fact is this elite company is still outperforming.
Other Factors to Consider
Despite the remarkable run, OXY remains relatively undervalued and underappreciated as we can see below:
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. And as we know, Occidental Petroleum has seen a recent batch of positive revisions. As long as this trend remains intact (and OXY continues to post earnings beats), the stock should continue its bullish run this year.
Bottom Line
With a robust earnings history and an improving future outlook, Occidental Petroleum represents a great opportunity. The Zacks Rank #1 (Strong Buy) stock is a compelling investment with an attractive valuation and strong price momentum.
Solid institutional buying and a high-performing industry group should continue to provide a tailwind for the stock price. Recent positive earnings estimate revisions will help to provide a cushion during any potential market decline. If you’re looking for a way to diversify your portfolio, make sure to put OXY on your shortlist.
Source: nasdaq
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