It’s a great day to be an oil company. For Occidental Petroleum (OXY), it’s great for a couple reasons. The company’s stock has made great inroads over the last few months. That’s thanks in large part to soaring oil prices. Occidental recently got some gains from a different source: fresh investment from Warren Buffett.
I’m bullish on Occidental Petroleum as I am on most any oil company right now.
The last 12 months for Occidental Petroleum were already trending upward. When February hit, that started an upward trek for Occidental that added around 50% to the stock’s value in the space of roughly six weeks. It’s been up around that level ever since.
The latest news for Occidental only makes things better. The company posted adjusted earnings per share of $2.12, which readily beat the Zacks estimates of $1.97 per share. It also posted $8.53 billion in revenue, which not only beat Zacks by 7.2%, it also trounced revenue from this time last year, coming in at $5.48 billion.
Earlier word that Buffett bought in heavily, and now owns over 14% of the company, didn’t hurt either.
Wall Street’s Take
Turning to Wall Street, Occidental Petroleum has a Moderate Buy consensus rating. That’s based on 10 Buys, seven Holds, and one Sell assigned in the past three months. The average Occidental Petroleum price target of $69.47 implies 16.3% upside potential.
Analyst price targets range from a low of $50 per share to a high of $90 per share.
Investor Sentiment is a Mixed Bag
Right now, Occidental Petroleum carries a Smart Score of Perfect 10. There’s a lot to like with Occidental right now. Though the picture isn’t perfect, many investors should be tempted to get in.
The first point starts with the TipRanks 13-F Tracker, and what it has to say about hedge fund involvement. Hedge fund involvement has been in decline ever since December 2020, but not by a whole lot. The biggest drop for Occidental shares came back in June 2021, when shares went from around 216.19 million to around 176.37 million.
That’s a fairly big drop in objective terms — it’s around 40 million shares gone — but with 176 million still left, it’s not like hedge funds abandoned ship. Much smaller declines followed, generally following the upward track of share prices.
Meanwhile, insider trading is somewhat more unusual. For the full year, buy transactions narrowly edged out sell transactions 16 to 14. Focusing on the last three months, there was one buy transaction in April.
As for retail investors who hold portfolios on TipRanks, that figure is much more encouraging. Not only are portfolios with Occidental Petroleum in them up 3.4% in the last seven days, they’re also up 9.7% in the last 30 days.
Finally, there’s the matter of Occidental Petroleum’s dividend history. The pandemic dealt it a blow from which it has only recently recovered. Worse, not even all the way. In March 2020, just as the pandemic dawned, Occidental was paying $0.79 per quarter. Then it slipped to under one cent until March 2022, when it recovered to an anemic $0.13 per quarter.
Right Place, Right Time
Oil prices are on a tear. Gas prices are leaving drivers seething, and eyeing their polling places a little closer ahead of November’s mid-term vote. Joe Biden is almost frantically trying to convince people that he can totally fix this disaster in the making.
With the average gas price currently at $4.37 per gallon in the U.S., and peak driving season not yet upon us, it’s clear that the huge gas prices are going to cripple travel. This comes at the worst possible time: a time when it was actually possible to go places without wearing masks, or waving a vaccine passport like a cross in a room full of vampires.
This doesn’t even factor in the costs of diesel, which are higher still and pose serious threats to the larger economy.
What it does, however, is improve prospects for oil companies. Occidental Petroleum is no different here. With oil prices steadily on the rise, so too will oil company profits improve if they do absolutely nothing else differently.
So it’s not much of a surprise that Buffett bought in; with prices on the rise, oil companies need make few changes to ride a wave of upward profits.
Concluding Views
A rising tide lifts all boats. Occidental Petroleum is the beneficiary of just such a rise.
That’s good news for investors, and is likely to be the case for some time to come.
With Occidental still trading below its average targets, it’s looking like a decent time to get in.
How long that will be the case is anyone’s guess, but for now, I’m bullish on Occidental, which is likely to hold onto success for at least the next few months.
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