Occidental Petroleum Corporation Stock Buy Recommendation Reiterated (OXY)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK (TheStreet) -- Occidental Petroleum Corporation (NYSE:OXY) has been reiterated by TheStreet Ratings as a buy with a ratings score of B . The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

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Highlights from the ratings report include:

• OXY's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.19, which illustrates the ability to avoid short-term cash problems.
• The gross profit margin for OCCIDENTAL PETROLEUM CORP is rather high; currently it is at 55.40%. Regardless of OXY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, OXY's net profit margin of 23.00% significantly outperformed against the industry.
• OXY, with its decline in revenue, slightly underperformed the industry average of 2.7%. Since the same quarter one year prior, revenues slightly dropped by 6.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
• OCCIDENTAL PETROLEUM CORP's earnings per share declined by 26.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, OCCIDENTAL PETROLEUM CORP increased its bottom line by earning $8.15 versus $5.61 in the prior year. For the next year, the market is expecting a contraction of 15.2% in earnings ($6.91 versus $8.15).
• In its most recent trading session, OXY has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

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. The company has a P/E ratio of 10.7, equal to the average energy industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Occidental has a market cap of $66.94 billion and is part of the basic materials sector and energy industry. Shares are down 10% year to date as of the close of trading on Thursday.

You can view the full Occidental Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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