This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

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

Stocks in this article: OXY

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

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs