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Can OXY’s Stock Price Keep Rallying after Its 1Q16 Earnings?

Nicholas Chapman

What Caused Occidental Petroleum's 1Q16 Earnings Miss?

(Continued from Prior Part)

Occidental Petroleum’s stock price action

Occidental Petroleum (OXY) announced its 1Q16 earnings on May 5, 2016, before the market opened. Following its earnings release, a contrarian reaction was observed, where lower-than-expected earnings saw OXY’s stock price rise by 3.0% the next day.

It should be noted that in the three months leading up to its earnings, Occidental Petroleum’s stock price rose ~29%, mainly due to the ~57% rise in crude oil (USO) (SCO) (DWTI) prices during the same period.

Occidental Petroleum’s stock price uptrend

Falling crude oil (UCO) and natural gas (UGAZ) prices over the last two years have led to a falling trend in the entire upstream sector. OXY was no exception.

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However, since January 2016, Occidental Petroleum’s stock has been in a new uptrend. It’s clearly making a pattern of higher highs and higher lows.

Occidental Petroleum’s relative performance

So far in 2016, OXY has underperformed other upstream companies. OXY has risen by ~14%, whereas other oil and gas producers Denbury Resources (DNR), Continental Resources (CLR), and WPX Energy (WPX) have risen by ~80%, ~69%, and ~50%, respectively.

The Energy Select Sector SPDR ETF (XLE) generally invests at least 95% of its total assets in oil and gas equities from the SPDR S&P 500 ETF (SPY).

Occidental Petroleum’s historical stock price movements

In the last six quarters, OXY missed its earnings expectations in 4Q15 and 2Q15.

OXY reported its 4Q15 earnings before the market opened on February 4, 2016. In 4Q15, excluding one-time items, OXY reported earnings per share (or EPS) of -$0.17, $0.04 lower than analysts’ consensus estimate of -$0.13. Following OXY’s earnings release, lower-than-expected earnings saw its stock price fall by ~4% in four sessions.

A similar downward reaction was observed after OXY’s 2Q15 earnings. Its stock price fell by ~4% in three sessions after missing analysts’ consensus EPS estimate by $0.02.

Browse this series on Market Realist: