Occidental Set to Report Q1 Earnings: How Should You Play the Stock?

Occidental Petroleum OXY is expected to report a year-over-year increase in its top and bottom lines when it reports first-quarter 2025 results on May 7, after market close. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

The Zacks Consensus Estimate for OXY’s first-quarter revenues is pegged at $7.15 billion, indicating an increase of 18.93% from the year-ago reported figure.

The Zacks Consensus Estimate for earnings is pegged at 73 cents per share. The Zacks Consensus Estimate for OXY’s first-quarter earnings indicates an increase of 12.31% from the year-ago reported figure.

Earnings Surprise History

OXY’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 23.56%.

What the Zacks Model Unveils

Our model predicts a likely earnings beat for OXY this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is the case here, as you can see below.

You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Earnings ESP: OXY has an Earnings ESP of +0.56%.

Zacks Rank: Occidental Petroleum currently carries a Zacks Rank #3.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Some other stocks in the same sector that have the combination of factors indicating an earnings beat this season are Murphy Oil Corporation MUR, APA Corporation APA and Energy Transfer LP. ET. MUR, APA and ET have an Earnings ESP of +4.90%, +4.52% and +1.54%, respectively, and currently carry a Zacks Rank of 3 each.

Factors Likely to Have Shaped OXY’s Q1 Earnings

Permian Resources assets remain a consistent contributor to the firm’s overall production. Production from Permian is expected in the range of 745-765 thousand barrels of oil equivalent per day (Mboe/d) for first-quarter 2025, and the company expects total production in the band of 1,370-1,410 Mboe/d in first-quarter 2025.

OXY’s first-quarter production volumes are projected to decline compared to the previous quarter, primarily due to lower activity levels in the fourth quarter and a reduced working interest in newly drilled Permian wells. Production in the Permian Basin was also affected by severe winter weather in January. Additionally, planned maintenance and platform life-extension work at Horn Mountain, along with scheduled turnarounds at Al Hosn and Dolphin, are expected to further impact volumes.

The company is also working to reduce its operating expenses and trying to reduce its domestic lease operating expense, which is likely to boost margin and have a positive impact on earnings.

Occidental Petroleum is likely to have gained from its ongoing debt reduction. The company retired debts worth $4.5 billion in 2024, and will retire more debts using free cash flow and proceeds from non-core assets divestiture. The ongoing debt reduction is strengthening its balance sheet and reducing its interest expenses, boosting earnings.

OxyChem's first-quarter income is anticipated to decline compared to the previous quarter, mainly due to three short-term factors. The January winter storm temporarily disrupted operations and limited market access. Additionally, an unplanned outage at the Ingleside facility lasted nearly two weeks. An Increase in raw material costs also adversely impacted income.

OXY’s Price Performance

OXY shares have lost 17.2% in the past three months compared with the industry’s decline of 9.3%.

OXY Stock Trading at a Premium

Occidental Petroleum’s shares are somewhat expensive on a relative basis, with its current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA TTM) being 5.11X compared with its industry average of 4.93X.

Investment Thesis

Occidental Petroleum has benefited from its robust domestic operations and strategic focus on Permian resources, where its core development area continues to deliver strong results. The addition of CrownRock assets is also expected to have contributed to production volumes in the first quarter.

However, since the company typically maintains exposure to market commodity prices, the decline in oil prices during the first quarter is likely to have negatively affected its earnings.

Summing Up

Occidental Petroleum’s cash flow generation, initiative to lower debts, and contribution from acquisitions are expected to have boosted its performance. Earnings from the Chemical segment are expected to be down in the to-be-reported quarter.

Occidental Petroleum currently has a Zacks Rank #3. Hence, those who already own this stock would do well to retain it in their portfolio, and others should wait for a better entry point.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research