Why Occidental Petroleum (OXY) Stock Is Up Today

NEW YORK (TheStreet) -- Occidental Petroleum (OXY) was gaining 0.9% to $98.30 Monday after agreeing to pay $190 million to clean up the Passaic River in New Jersey.

As the legal successor to Diamond Shamrock Chemical, which intentionally dumped industrial waste into the river for decades, Occidental Petroleum is liable for the cleanup, according to Bloomberg. The agreement for the payment still requires approval from a judge and the New Jersey Department of Environmental Protection.

If the agreement is approved, Occidental Petroleum said it will seek reimbursement from Maxus Energy, a subsidiary of YPF (YPF) . Occidental Petroleum says YPF is financially for the claims against it regarding the Passaic River.

Must read: Here's How Occidental Petroleum Is Finally Remaking Its Business

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TheStreet Ratings team rates OCCIDENTAL PETROLEUM CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate OCCIDENTAL PETROLEUM CORP (OXY) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, increase in net income, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • OXY's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 5.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 48.97% is the gross profit margin for OCCIDENTAL PETROLEUM CORP which we consider to be strong. 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 22.80% significantly outperformed against the industry.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Oil, Gas & Consumable Fuels industry average. The net income increased by 8.2% when compared to the same quarter one year prior, going from $1,322.00 million to $1,431.00 million.
  • OXY's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.93 is somewhat weak and could be cause for future problems.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: OXY Ratings Report

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