Occidental Petroleum (OXY) is down more than 15% in the last few months. The stock has been hit by concerns that have turned sentiment negative on the overall energy sector, low natural gas prices and in the last week by falling oil prices. It also missed its latest quarterly earnings estimates by three cents, even as it beat revenues by over $200mm. However, there were some positives in the earnings report and stock is now providing a great entry point for value investors.
Key Earnings Report Highlights
- Production rose to a record 755,000 BOE/D
- Liquids production increased 35,000 BOE/D
- Operating cash flows increased $600 million to $2.8 billion in the quarter compared to the first quarter of 2011 as the company focused on oil & liquid production over natural gas.
- It also recently increased its dividend 17% to $2.16 a share.
Occidental Petroleum - "Occidental Petroleum Corporation engages in the exploration and production of oil and gas properties in the United States and internationally. The company operates in three segments: Oil and Gas; Chemical; and Midstream, Marketing, and Other". (Business Description from Yahoo Finance)
4 additional reasons OXY has become a bargain at just over $87 a share:
- It has an A rated balance sheet, now yields 2.4% and sells for less six times operating cash flow.
- The stock's forward PE is around 9.3, a discount to its five year historical average (12.7).
- It more than doubled operating cash flow from FY2009 to FY2011 and analysts have it growing revenues between 6% to 8% in both FY2012 and FY2013.
- The median analysts' price target for the 16 analysts that cover the stock is $116.50. It also appears to be trying to establish a short term technical support level at current price levels (See Chart).
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in OXY over the next 72 hours.