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Why Occidental (OXY) Might be Well Poised for a Surge

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Occidental Petroleum (OXY) appears an attractive pick given a noticeable improvement in the company's earnings outlook. The stock has been a strong performer lately, and the momentum might continue with analysts still raising their earnings estimates for the company.

The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this oil and gas exploration and production company, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

Consensus earnings estimates for the next quarter and full year have moved considerably higher for Occidental, as there has been strong agreement among the covering analysts in raising estimates.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

The company is expected to earn $2.68 per share for the current quarter, which represents a year-over-year change of +737.5%.

Over the last 30 days, five estimates have moved higher for Occidental while one has gone lower. As a result, the Zacks Consensus Estimate has increased 24.09%.

Current-Year Estimate Revisions

For the full year, the earnings estimate of $9.66 per share represents a change of +278.82% from the year-ago number.

In terms of estimate revisions, the trend for the current year also appears quite encouraging for Occidental. Over the past month, nine estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 19.56%.

Favorable Zacks Rank

The promising estimate revisions have helped Occidental earn a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

While strong estimate revisions for Occidental have attracted decent investments and pushed the stock 8% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.


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Occidental Petroleum Corporation (OXY) : Free Stock Analysis Report

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