Occidental Petroleum Corporation (NYSE: OXY) – Q1 FY 2011 Earnings Preview
Wednesday, April 27, 2011 9:32 AM

One of the largest oil and gas companies in the U.S., Occidental Petroleum Corp. (NYSE: OXY) is expected to report its first quarter FY 2011 earnings on April 28, 2011. In the last four quarters, the company's reported EPS exceeded analysts' consensus estimates for quarter ended September 2010 and December 2010 by margins of 8.90 percent and 2.60 percent, respectively. For quarters ended March 2010 and June 2010 Occidental's reported earnings missed analysts' consensus estimates by margins of 2.90 percent and 1.50 percent, respectively.

Occidental conducts its operations through various oil and gas, chemical, midstream, marketing and other subsidiaries and affiliates. Occidental's principal businesses consist of three segments.  The oil and gas segment explores for, develops, produces and markets crude oil, including natural gas liquids (NGLs) and condensate, as well as natural gas.  The chemical segment manufactures and markets basic chemicals, vinyls and other chemicals.  The midstream, marketing and other segment gathers, treats, processes, transports, stores, purchases and markets crude oil (including NGLs and condensate), natural gas, carbon dioxide (CO2) and power.

For the fourth quarter 2010, Occidental reported net income of $1.2 billion, or $1.49 per diluted share, for the quarter, compared with $938 million, or $1.15 per diluted share, for the fourth quarter of 2009. Net revenue for the quarter was $5.06 billion, up 15 percent, compared with revenue of $4.38 billion in the same quarter previous year. Net income for the twelve months of 2010 was $4.5 billion, or $5.56 per diluted share, compared with $2.9 billion, or $3.58 per diluted share for 2009. Full year 2010 core results were $4.7 billion or $5.72 per diluted share, compared with $3.2 billion or $3.92 per diluted share for 2009.

During the first quarter, Occidental had to cut the quarter's production outlook due to turmoil in Libya and Yemen, slower capital spending in Iraq and bad U.S. weather. Occidental expected output to be 29,000 barrels of oil equivalent per day (boed) lower in the quarter, with half of that decline due to the effects of winter weather on U.S. production and oil price movements. The company had previously given production guidance of 740,000 to 750,000 boed for the quarter, but has now lowered that to 711,000 to 721,000 boed.

During the first quarter, the company's board of directors increased the company's annual dividend 21 percent to an annual rate of $1.84 per share, compared with the previous annual rate of $1.52 per share. The Occidental board announced in December its intention to increase the dividend. The $.46 per share quarterly dividend was paid on April 15, 2011, to stockholders of record on March 10, 2011.

The main competitors for Occidental Petroleum are Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX). In the last one year, Exxon Mobil reported earnings of $6.22 per share on revenue of $342.60 billion. Chevron reported earnings of $9.48 per share on revenues of $189.61 billion. On the other hand, Occidental reported earnings of $5.56 per share on revenue of $19.04 billion.

Occidental has a total market capitalization of $80.24 billion. The company has a P/E ratio of 17.75, lower than the industry's average P/E of 25. The P/B and P/S ratio of the company is 2.47 and 4.21, respectively, compared with the  industry's P/B and P/S ratio of 2.51 and 7.70, respectively. The net profit margin of the company is 26.25 percent, much higher than industry's average margin of 8.80 percent. The ROE of the company is 15.06 percent, higher than that of the industry's ROE of 11.90 percent.

For the first quarter, analysts' EPS estimates range from a low of $1.63 to a high of $1.95 per share, compared with a consensus estimate of $1.79 per share to $1.32 per share in the year ago quarter. For this quarter, analysts' revenue estimates range from a low of $4.32 billion to a high of $5.59 billion, compared with a consensus estimate of $5.17 billion to $4.77 billion in the same quarter a year ago. For the quarter ended March, 2011, the consensus EPS forecast has increased from $1.77 per share estimated 7 days ago to the current estimate of $1.79 per share.

In the last 52 weeks, the company's stock has been trading in the range of $72.13 to $107.56. The last trading price of the stock was $98.71 on April 19, 2011. During the first quarter, on April 5, 2011, RBC Capital downgraded OXY's rating to sector perform from outperform.



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