This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Occidental Petroleum's Stock Is on Sale -- But Not for Long

Value investors who like to buy after a correction might be cheered to know that since the Feb. 7 intraday high price of $88.74, shares of OXY corrected 13% before moving higher the past week. Even at Monday's high of $79.21, that's still 10.7% below the high on Feb. 7. OXY is still on sale and here's why.

To begin with, it maintained a trailing 12-month operating margin throughout 2012 of over 30% and by the end of 2012, it had operating cash flow of $11.3 billion on annual revenue of $24.17 billion. That means it can continue to service its $7.62 billion total debt (most recent quarter). With the Federal Reserve keeping interest rates near zero, the opportunity to reduce the cost of that debt is auspicious too.

As an investor who likes getting paid a substantial dividend while waiting for a stock's price to push higher, it is important to note that OXY's dividend payout ratio as of the end of 2012 was a manageable 38% of earnings. That's impressive in light of last quarter's 79.4% year-over-year drop in its quarterly EPS.

Over the past five years, the stock's price saw a gut-wrenching low during the late-2008 "financial fiasco," dropping to almost $40-a-share only to see prices nearly triple to around $118 in the first half of 2011.

Then OXY shares corrected to below $70 in the last half of 2011 only to leap back above $100 by the beginning of 2012. Study carefully the five-year chart below for clues as to what might happen next. OXY Chart OXY data by YCharts

When the company reports earnings and sales growth on April 22 (in three weeks), the analyst community's consensus average estimate for EPS calls for around a 13% decline from a year earlier. When it comes to sales growth and revenue, the same group's average estimate is for a meager 1.7% increase.

My point is that expectations are low, the stock's price has been under a lot of pressure, and the officers of the company will be on the hot seat when they step into the earnings confessional. When you look at Oxy's Web site describing its businesses and operations, you may perceive that OXY is the kind of company that a wealthy activist hedge fund would like to take control of.
2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
OXY $75.57 -1.00%
AAPL $95.18 1.64%
FB $117.43 -0.96%
GOOG $692.36 -0.84%
TSLA $232.32 -3.92%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs