Why Is Occidental (OXY) Down 0.3% Since Last Earnings Report?

A month has gone by since the last earnings report for Occidental Petroleum (OXY). Shares have lost about 0.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Occidental due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers. <p style="text-align: justify;"><strong>Occidental (OXY) Q2 Earnings Miss Estimates, Revenues Beat</strong><br /><br />Occidental Petroleum Corporation (OXY) reported second-quarter 2018 earnings of $1.10 per share, missing the Zacks Consensus Estimate of $1.25 by 12%. In the year-ago quarter, the company’s bottom line came in at 15 cents per share.<br /><br /><strong>Total Revenues</strong><br /><br />Occidental Petroleum's total revenues were $4,083 million, beating the Zacks Consensus Estimate of $4,008 million by 1.9%. Also, the top line surged 33.4% year over year from $3,060 million.<br /><br />This year-over-year improvement in total revenues was owing to a strong production from Permian Resources, which soared 46% year over year coupled with revenue growth from Midstream & Marketing segment.<br /><br /><strong>Production & Sales</strong><br /><br />Occidental Petroleum’s average daily net oil, liquids and gas production volume expanded to 639,000 barrels of oil equivalent per day (boe/d), up from 601,000 boe/d in the year-ago quarter. This improvement in the production volume was backed by an increased drilling activity and a solid output in the Permian Resources region.<br /><br />Occidental Petroleum’s production in the second quarter was within the company’s guidance of 628,000-648,000 boe/d. However, Permian Resource’s production was better at 201,000 boe/d than the projected range of 188,000-198,000 boe/d provided by the company.<br /><br />In the reported quarter, total sales volume was 622,000 boe/d compared with 603,000 boe/d recorded in the year-ago period.<br /><br /><strong>Realized Prices</strong><br /><br />Realized prices for crude oil in the second quarter rose 35.6% year over year to $63.12 per barrel worldwide.<br /><br />Worldwide realized NGL prices increased 44% to $27.21 per barrel.<br /><br />However, domestic natural gas prices were down 33.2% to $1.49 per thousand cubic feet.<br /><br /><strong>Highlights of the Release</strong><br /><br />Pretax income from its Chemical Segment in the second quarter was $317 million, up 37.8% year over year and above the guidance of $300 million. This upside was on the back of higher realized prices coupled with volume growth across many core product lines. Also, lower ethylene cost than what the company anticipated led to a favorable plant margin.<br /><br />Midstream and Marketing segment’s pretax income was $250 million, up 110.1% year over year. This uptick was courtesy of higher earnings in the segment from an improved crude oil spread.<br /><br /><strong>Financial Position</strong><br /><br />As of Jun 30, 2018, Occidental Petroleum had cash and cash equivalents of $1,362 million compared with $1,672 million as of Dec 31, 2017.<br /><br />As of Jun 30, 2018, the company had long-term debt (net of current portion) of $10,312 million compared with $9,328 million as of Dec 31, 2017.<br /><br />In the second quarter of 2018, cash from operations was $1,756 million, down 5% from $1,849 million in the prior-year period.<br /><br />In second-quarter 2018, Occidental Petroleum’s total capital expenditure was $1,287 million, higher than $779 million invested in the year-ago quarter.<br /><br /><strong>Guidance</strong><br /><br />Occidental Petroleum expects third-quarter production in the range of 665,000-687,000 boe/d and Permian Resources production within 215,000-225,000 boe/d.<br /><br />The company estimates 2018 production between 650,000 and 664,000 boe/d, up from the prior forecast of 645,000-665,000 boe/d.<br /><br />Occidental Petroleum envisions 2018 Permian Resources production in the range of 207,000-215,000 boe/d, up from the previous guidance of 198,000-210,000 boe/d.</p>

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Occidental has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Occidental has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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