Occidental Petroleum: A Warren Buffett Stock Worth Buying In 2022
05 Julho 2022 - 3:54PM
Finscreener.org
Occidental Petroleum (NYSE:
OXY) is a Texas-based company engaged in the
process of exploration of hydrocarbon across the regions of the
United States, the Middle East, Africa, and Latin America.
Occidental’s stock had a rough 2020 but since the end of last year,
the company’s fortunes started to change.
Thanks to the supply-demand
imbalance as well as the rising price levels due to inflation,
shares of the energy heavyweight have been gaining momentum in
2022.
Occidental Petroleum stock has
gained over 90% year-to-date, crushing the broader market returns
by a wide margin. Moreover, Warren Buffett’s
Berkshire Hathaway increased its
stake in Occidental
Petroleum in recent months making it all the more attractive to
investors.
So, considering the recent
momentum in the oil industry and the prospects Occidental Petroleum
possesses does this stock make a worthwhile buy at this
moment?
Occidental Petroleum is a hedge against
Inflation
Inflation around the world
reached record-high
levels in May. The U.S.
itself is experiencing inflation of 8.6% which is the highest it
has ever experienced over the
past 40 years. Moreover, the Russia-Ukraine conflict has led
to a rapid increase in the price of Brent crude. Sky-high gas
prices coupled with the worst inflation readings have made the oil
and gas stocks highly attractive.
The market expects this rally to
continue for a longer period. Oil producers in the US too
have ramped up
their production levels to about
11.85 million barrels per day this year compared to the 11.18
million barrels per day they used to produce last year to
capitalize on this high demand phase. These numbers are expected to
rise further probably by the end of this year.
Therefore, as the oil price
levels continue to rise in the coming days, oil and gas stocks like
Occidental Petroleum will be able to book higher revenues and thus
inflate their profits much more. Further, the tax incentives the
company receives for
carbon capture
before it releases its emissions
into the atmosphere is another catalyst for its growing
revenues.
So, in this inflationary market
one can preserve their cash or simply hedge their portfolio from
inflation to a large extent by investing in stocks like Occidental
Petroleum.
Occidental Petroleum was able to
deliver its third consecutive
record quarterly earnings
in the first quarter of 2022. Its
net income for Q1 stood at $4.7 billion translating to earnings of
$4.65 per share. This was substantially higher when compared to
last year’s net income of $1.3 billion or $1.37 per
share.
Wall Street expects Occidental
Petroelum to increase revenue by 40.6% to $37 billion in 2022.
Further, its adjusted earnings per share might rise by an
astonishing 316% to $10.62 per share this year. We can see why
Warren Buffett increased exposure to this energy company in recent
months,
OXY stock pays investors a steady dividend
Most investors love to invest in
dividend stocks. Occidental Petroleum
provides dividends
yielding 0.90%. The company had
reduced its payouts since the pandemic due to unfavorable market
conditions but has always been consistent with its payments over
the past four decades irrespective of market conditions.
The stock closed trading last
week at $$60.44 and the average analyst price target for the stock
is $75. This is a potential upside of over 25%
The oil sector despite its
volatility is performing really well in the present times. So, if
anyone wants to capitalize on the current momentum of the energy
sector they can invest in stocks like Occidental Petroleum.
Besides, the long-term prospects of OXY stock are attractive making
it can be a good long-term buy as well.
Occidental Petroleum (NYSE:OXY)
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