OXY Outperforms Industry in Past Month: Buy, Hold or Sell the Stock?

Occidental Petroleum Corporation’s OXY shares have gained 26.8% in the past months compared with the Zacks Oil and Gas-Integrated-United States industry’s rise of 10%. The company has also outperformed its sector and the Zacks S&P 500 composite’s return in the same time period.

Occidental Petroleum is a low-cost producer with significant exposure to the Permian Basin and is likely to benefit from rising oil prices amid the ongoing crisis in the Middle East.

The company also has international operations and some exposure in the region. However, none of its operations depend on the Strait of Hormuz for transporting oil, which provides an added advantage.

Price Performance (One month)

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Another company, Devon Energy Corporation DVN, operating in the same sector, has no exposure in the middle-east crisis region. Devon is focused on domestic basins and has gained 3.4% in the past month.

OXY is trading above its 50 and 200-day simple moving average (“SMA”), signaling a bullish trend. The SMA is a key indicator for traders and analysts to identify support and resistance levels. It is considered particularly important, as this is the first marker of an uptrend or downtrend of the stocks.

OXY’s 50 and 200-Day SMA

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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.

Drivers Behind Occidental Petroleum Stock’s Performance

Oil price is rising due to the ongoing crisis in the middle-east and Occidental Petroleum, the low-cost operator having significant exposure in the Permian Basin, is going to benefit from the increase in oil prices, which will boost its near-term margins.

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, as a low-cost operator with high-quality assets across several regions worldwide, enjoys a competitive advantage over its peers. The company’s strong focus on cost discipline is also expected to support its performance. Through ongoing cost management initiatives, Occidental Petroleum aims to achieve $500 million in sustainable cost reductions in 2026. Since 2023, OXY has already realized $2 billion in annualized cost savings across its U.S. onshore operations, which is expected to strengthen cash flow and improve margins.

Occidental Petroleum has benefited from the sustained focus on resources in the Permian Basin and continues to strengthen its presence in the region through acquisitions. The acquisition of CrownRock L.P. is expected to further enhance and expand Occidental Petroleum’s operations in the basin. Occidental Petroleum also holds roughly 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 the company’s overall output.

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 8.47% and 5.64%, respectively, in the past 60 days.

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Devon Energy’s 2026 and 2027 earnings per share indicate a decline of 18.87% and 15.27%, 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 last four reported quarters, the average surprise being 38.74%.

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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 6.96X compared with its industry average of 5.53X.

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Another company, ConocoPhillips COP, operating in the same industry, has exposure in the middle-east. The stock is currently trading at 6.47X EV/EBITDA TTM, a premium to its industry’s valuation.

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 11.42%.

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ConocoPhillips’ ROE is presently pegged at 11.9%, which is better than its industry level.

Rounding Up

Occidental Petroleum’s emphasis on reducing debt, supported by the strength of its domestic operations and the synergies from recent acquisitions, is likely to bolster overall performance. The increased oil prices will also boost prospects of 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 these challenges, holding this Zacks Rank #3 (Hold) stock remains advisable due to its robust U.S. operations and significant presence in the resource-rich Permian Basin. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Devon Energy Corporation (DVN): Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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