Oil and gas industry giant Occidental Petroleum Corporation (OXY) will release its fourth-quarter 2023 financial results on February 14, 2024. The company’s Chief Executive, Vicki Hollub, believes that the oil market will move from oversupply to a long period of shortage in 2025 and beyond. This could mean higher oil prices as demand outpaces supply.
On the other hand, the company’s financials in the last reported quarter were far from stellar. OXY’s adjusted EPS decreased 51.6% from the prior-year quarter to $1.18. Furthermore, for the fourth quarter, analysts expect the company’s revenue and EPS to decline 17.5% and 57.2% year-over-year to $6.87 billion and $0.69, respectively.
Moreover, the company’s pending acquisition of Midland-based oil and gas producer CrownRock L.P., could come under fire due to regulations. The U.S. Federal Trade Commission (FTC) seeks more information on the $12 billion deal, making it the latest big oil merger to face increased scrutiny.
Given this backdrop, let’s look at the trends of OXY’s key financial metrics to understand why the stock might be avoided now.
Occidental Petroleum: A Roller Coaster of Financial Performance from March 2021 to September 2023
The trailing-12-month net income of OXY has experienced notable fluctuations over the years, according to the data series. The primary points of interest are as follows:
- Starting at a significant loss of -$12.96 billion reported on March 31, 2021, OXY's net income underwent severe fluctuations, with changes in both directions.
- A gradual improvement is observed through September 30, 2021. Despite still being negative, the net income decreased to a lesser deficit of -$327 million.
- By December 31, 2021, OXY had escaped from its deficit trend, reporting a substantial profit with a positive net income of $2.32 billion.
- A spark in growth momentum was noticed by June 30, 2022, with an observed net income increase to $10.99 billion.
- The peak net income was reached on December 31, 2022, at $13.30 billion, marking the most notable high within this timeframe.
- The following year saw a downward trend, with net income dropping to $5.42 billion by September 30, 2023.
In conclusion, despite commencing with a large deficit, OXY managed to make a significant turnaround within a short period. From March 2021 to September 2023, the net income grew from a deficit of $12.96 billion to a surplus of $5.42 billion, depicting a significant increase. However, a downward trend is noticeable in the last few quarters of the series, requiring close attention in upcoming periods.
The trailing-12-month revenue trend of OXY demonstrates a marked increase from March 2021 through to December 2022, followed by a slight decrease into September 2023. Here's a summary of the most significant shifts:
- Revenue started at $15.09 billion on March 31, 2021, and displayed consistent growth quarter-on-quarter, peaking at $37.10 billion on December 31, 2022. This represents a whopping 145% increase over the period.
- However, the first quarter of 2023 witnessed a sharp decrease, with revenue dropping to $35.82 billion.
- Further drops were reported during the following quarters of 2023, bringing the revenue down to $29.71 billion by September 30, 2023.
Despite some fluctuations, OXY's most recent years highlight a solid performance in terms of revenue. However, the downward trend in 2023 may require further examination.
The gross margin of OXY has generally displayed an upward trend, albeit with regular fluctuations, based on the given data from March 31, 2021, to September 30, 2023. Here is a summary of the observed figures:
- It's important to note that OXY had a gross margin of -10.5% on March 31, 2021.
- There was a remarkable turnaround by June 30, 2021, when the margin rose significantly to 3.1%.
- From then on, the gross margin consistently surged every quarter, peaking at 44.8% on September 30, 2022.
- However, after this peak, OXY's gross margin began to decrease, ending at 34.8% on September 30, 2023.
Taking into consideration the first recorded value (-10.5%) and the last value in the series (34.8%), OXY's gross margin grew by approximately 45.3% during the period. Despite the fluctuations throughout this time, primarily the decline in gross margin from the end of 2022, the overall trend in gross margin indicates an improvement.
The data presented chronicles the trend and fluctuations in the current ratio of OXY from March 2021 to September 2023.
- In the first half of 2021, OXY experienced a rise in its current ratio. It increased from 1.17 in March to 1.34 in June but fell slightly to 1.09 by the end of September.
- This downward trend continued until the end of December 2021, when it climbed slightly to a ratio of 1.23.
- The year 2022 started with a somewhat consistent decrease in the current ratio from 1.16 at the beginning of the first quarter to 1.07 at the end of the second quarter. However, it slightly improved in the third quarter to 1.10 before gradually increasing again to 1.15 by the end of the year.
- In 2023, the company's current ratio was revealed to have shrunk significantly. Starting from 1.1 in March, it declined steadily, reaching 1 in June, then further dropped to 0.93 in September.
To calculate the overall growth rate, the difference between the last value (September 2023 at 0.93) and the first value (March 2021 at 1.17) is considered. This shows a decrease of approximately 21%. This analysis emphasizes the more recent data. There seems to be an overall declining trend in the current ratio of OXY, particularly notable during 2023.
Tracking the Downward Trend in Occidental Petroleum Corporation's Share Price (August 2023 - February 2024)
The share price data for OXY from August 2023 to February 2024 showcases a general downward trend. It is important to note that there are slight fluctuations throughout this period. Here are the month-by-month details:
- The share price starts at $63.78 on August 18, 2023, and shows a minor decrease, closing the month at $62.39.
- In September 2023, the price increased slightly in the first half of the month, reaching $66.02, but then it went back down, ending the month at $64.52.
- In October 2023, there was wide fluctuation, with the share price ranging from a low of $61.09 to a high of $65.76.
- November 2023 sees a declining trend in OXY’s share price, starting at $62.81 and dropping to $60.65 by the end of the month.
- The downward trend accelerated in December 2023, with the share price falling from $59.74 at the beginning of the month to $57.04. Thereafter, it rebounded somewhat, finishing the year at $60.72.
- The new year brings another dip as January 2024 opens with a share price of $59.82. This declines over the month, reaching $57.24 by the end.
- By February 13, 2024, the share price stabilized around $57.61.
In summary, while there was noticeable volatility, the overall trend of the period from August 2023 to February 2024 indicates a decline in the share price of OXY. Specifically, the price drop is more pronounced from November 2023 to January 2024, demonstrating an acceleration in the downward trend during these months. Here is a chart of OXY's price over the past 180 days.
Fluctuating Momentum, High Quality, and Growing Trends in Occidental Petroleum Ratings
In the Energy - Oil & Gas category of stocks, which consists of a total of 83 stocks, OXY's POWR Ratings grade and rank within the category fluctuate over time. Analyzing the data given from August 2023 through January 2024, here are some key observations:
- For the majority of the third quarter in 2023, specifically from August 19 to September 30, OXY maintained a constant POWR grade of D (Sell), and its rank dropped slightly from 80 to 82 in the category.
- In the first week of October, OXY's rank dropped further to 83, indicating its performance was not up to the mark compared to other stocks in the category.
- OXY's performance seemed to improve marginally from late October to mid-November. Its POWR grade remained at D (Sell). However, its rank improved to 77 by November 4, 2023.
- A notable improvement was observed from November 10, 2023, to December 16, 2023. During this period, its POWR grade improved to C (Neutral), and its rank further improved to 70 in the category.
- Unfortunately, starting from the week of December 23, 2023, its POWR grade worsened back to D (Sell). By the first week of January 2024, OXY's rank worsened to 75.
- The latest available data as of February 14, 2024, showed that OXY maintained a POWR grade of D (Sell) while its rank improved slightly to 71.
During the entire period, OXY's rank mostly hovered in the bottom tier of the category. The overall pattern suggests room for significant improvement in the company's performance.
Analyzing the POWR Ratings, the three most noteworthy dimensions for OXY are Momentum, Quality, and Growth.
Momentum: The Momentum dimension has seen a fluctuating trend over the months. It had a high rating of 56 in September 2023, then dipped to 34 by December 2023 before experiencing a slight increase again to 36 by January 2024.
Quality: This dimension consistently has the highest ratings among the three noteworthy dimensions. It peaked at 78 in December 2023 and January 2024, indicating strong and consistent performance in Quality across the given time period.
Growth: The Growth dimension showed a clear upward trend from August 2023 to January 2024. Starting with a low rating of 4 in August 2023, there was a significant jump to 14 by December 2023, and it remained relatively stable at 13 in January 2024.
This information provides valuable insights into OXY's performance across these critical dimensions over time.
How does Occidental Petroleum Corporation (OXY) Stack Up Against its Peers?
Other stocks in the Energy - Oil & Gas sector that may be worth considering are Secure Energy Services Inc. (SECYF), Cheniere Energy, Inc. (LNG), and Weatherford International plc (WFRD) - they have better POWR Ratings. Click here to explore more Energy - Oil & Gas stocks.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
OXY shares were trading at $57.47 per share on Wednesday morning, down $0.14 (-0.24%). Year-to-date, OXY has declined -3.75%, versus a 4.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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