Occidental Petroleum: 30% Undervalued And Growing Rapidly

| About: Occidental Petroleum (OXY)

Given the run up in oil prices recently, the energy sector is looking like a good place to deploy new money. One stock I am looking to add on the next market dip is Occidental Petroleum (NYSE:OXY).

“Occidental Petroleum Corporation, together with its subsidiaries, operates as an oil and gas exploration and production company primarily in the United States. The company operates in three segments: Oil and Gas; Chemical; and Midstream, Marketing, and Other.” (Business description from Yahoo Finance)

7 reasons Occidental Petroleum is a solid value at $91 a share:

  1. The company is taking advantage of new technologies to expand domestic production. In the last quarter, OXY had its all time record U.S. production.
  2. OXY has a strong A rated balance sheet, yields 2% and has grown its dividend by 17% annually over the last five years.
  3. It is a pure play oil and chemical stock, as it does not have refinery assets like some of the other oil majors. This takes substantial volatility out of its earnings stream.
  4. The company is doing a solid job in replacing and growing production. Credit Suisse predicts it will grow production at a 6% annual rate through 2015.
  5. Occidental has beaten consensus earnings for five straight quarters. Consensus quarterly earnings estimates for this quarter have been moving up over the last few days as well.
  6. With a forward PE of under 11 and selling at less than 7 times operating cash flow, OXY is undervalued by the market.
  7. The stock is some 30% under consensus analysts’ price target of $118. Credit Suisse has an “outperform” rating and $135 price target on OXY.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in OXY over the next 72 hours.