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Will Occidental Petroleum (OXY) Earnings Disappoint in Q3?

Occidental Petroleum Corporation (OXY) is slated to report third-quarter 2014 results before the opening bell on Oct 23.

Last quarter, Occidental Petroleum posted a positive earnings surprise of 2.29%. On an average, the company has posted a 2.54% positive surprise in the last four quarters. Let’s see how things are turning out for the third quarter.

Factors Influencing this Quarter

Los Angeles, CA-based, Occidental Petroleum has a good diversity of assets. It continues to expand its reserves and plans to increase capital expenditure in 2014 from last year. The investments will be focused on expanding its operations primarily in the Permian Basin and the Wolfcamp Shale, the Texas Delware Basin and Bone Spring as well.

Occidental Petroleum is consistently streamlining its assets by way of divestitures and spin-offs of its non-core assets. However, selling off its oil and gas assets will affect the company’s earnings as they are the largest revenue contributors. The company will need to drive production from its existing assets to compensate for the loss of production from divestitures.

Earnings Whispers?

Our proven model does not conclusively show that Occidental Petroleum will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. That is not the case here as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -5.33%. This is because the Most Accurate Estimate is at $1.60 per share while the Zacks Consensus Estimate is at $1.69 per share.

Zacks Rank: Occidental Petroleum’s Zacks Rank #3 when combined with a -5.33% ESP makes an earnings prediction inconclusive.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some stocks in the same industry you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this season:

Hess Corporation (HES) has an earnings ESP of +0.93% and a Zacks Rank #3 (Hold).

WPX Energy, Inc. (WPX) has an earnings ESP of +100.00% and a Zacks Rank #2 (Buy).

Carrizo Oil & Gas Inc. (CRZO) has an earnings ESP of +10.00% and a Zacks Rank #3 (Hold).

Read the Full Research Report on HES
Read the Full Research Report on OXY
Read the Full Research Report on WPX
Read the Full Research Report on CRZO


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