This Oil Stock Just Delivered Dream Results, Yet You Can Still Buy It at the Same Price as Buffett
Occidental just reported its best numbers in years, and the market barely noticed. The stock is falling along with oil, as if nothing had changed at the company. Either the market is right and the cheap valuation is a trap, or something is being sold here that is no longer a bet on the price of a barrel.
Key points
Occidental beat earnings estimates by 30%, yet the stock lost 7.2% in a month and is trading where it was in 2022.
The company has repaid $10.4 billion of debt this year, and one cost saving alone will bring in $740 million a year.
Management is promising more than $4 billion in additional annual cash flow, without producing a single extra barrel.
After four years, Berkshire is roughly breakeven on the common stock, but it is making money somewhere else entirely.
Analysts' consensus points to $71, while Bulios' fair value is $58 - that gap has a specific explanation.
Two numbers that don't get along
Occidental Petroleum $OXY reported third-quarter results on November 9, and on paper they look like a dream quarter. Adjusted earnings of $1.91 per share beat consensus of around $1.47 by roughly 30%, production of 1,427 thousand barrels of oil equivalent per day exceeded the midpoint of guidance, and debt principal fell to the milestone of $10.0 billion after the company repaid $10.4 billion since January.
The market responded in its own way. The stock lost 7.2% over the past month and, at a closing price of $55.76, is exactly where Berkshire Hathaway was buying it in 2022 and 2023. Three years of work on the balance sheet, and the stock price is back where it started.
The reason is outside the company, not inside it. Brent lost 16% last week, its biggest weekly drop since the start of the pandemic, and fell below $90 for the first time since August this morning after Donald Trump said the war with Iran could end “fairly soon.” OXY is falling with it, as if nothing inside the company had changed over the past year. But almost everything has changed.