Warren Buffett’s Berkshire Hathaway has been steadily increasing its stake in Occidental Petroleum (OXY), recently reaching 27.25% of the company’s shares. This persistent investment has left Wall Street investors curious about its rationale. Buffett’s perspective on Occidental’s prospects is extremely positive.
He recognizes that geopolitical tensions are part of the cyclical energy industry. By injecting funds into the company during times of hardship, Berkshire enhances investor confidence, demonstrating faith in the company’s long-term potential. Occidental has continually surpassed its production guidance, indicating significant growth potential.
For instance, Occidental’s guidance for the second quarter of 2024 was between 1.23 million and 1.27 million barrels per day, which it exceeded by 6,000 barrels per day. Additionally, Occidental’s investments in carbon dioxide projects will help increase oil production and meet green energy standards, ensuring consistent revenue streams. Occidental’s valuation remains appealing despite the challenges in oil and gas prices and rising operational costs.
Trading at a low multiple of 13.5 provides a favorable entry point for long-term investors.
Buffett’s Occidental stake increases
Another critical factor contributing to Berkshire’s enthusiasm is Occidental’s positive earnings per share (EPS), which exceeded expectations for four consecutive quarters.
Analysts forecast a significant increase in EPS by Fiscal 2025, potentially reaching $4.25 per share. On Wall Street, Occidental Petroleum is currently rated as a Moderate Buy. This rating comprises 6 Buys, 12 Holds, and 1 Sell, reflecting a potential 25.09% upside.
Despite a 15% drop in the stock since mid-October 2023 for various reasons, including geopolitical tensions and a decline in oil and gas prices, Warren Buffett’s continued investment in the stock emphasizes its underlying potential. The investment community is paying close attention to Occidental Petroleum’s upcoming earnings performance, which is slated to reveal its earnings on November 12, 2024. The company is forecasted to report an EPS of $0.87, showcasing a 26.27% downward movement from the prior year’s corresponding quarter.
Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $7.56 billion, up 2.2% from the year-ago period. Investors should watch for any changes in analyst estimates for Occidental Petroleum. Recent revisions tend to reflect the latest near-term business trends, and positive estimate revisions are typically a good sign for the company’s business outlook.
