Occidental Petroleum has seen a decline of nearly 14% in its stock over the past three months, primarily due to falling oil prices and geopolitical tensions. However, Evercore ISI has upgraded the company from underperform to outperform, increasing its price target from $58 to $65, suggesting a potential 26% upside.
Analyst Stephen Richardson highlighted that Occidental's improved balance sheet and enhanced capital efficiency are key factors that could allow the company to better align with commodity fundamentals. The firm has implemented strategies to lower well costs and stabilize free cash flow, which may support future shareholder returns, including stock buybacks projected for 2028.
This optimistic outlook contrasts with the broader Wall Street consensus, where a majority of analysts maintain a hold rating on the stock. Notably, Berkshire Hathaway holds a significant stake in Occidental, which has been a limiting factor on the company's equity leverage due to the terms of its preferred stock investment.
The earliest opportunity for Occidental to redeem this preferred stock is in August 2029, which adds another layer of complexity to its financial strategy