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Tuesday, TD Cowen analysts downgraded Occidental Petroleum shares, traded on the New York Stock Exchange (NYSE:OXY), moving from a Buy to a Hold rating and significantly reducing the price target to $45 from the previous $68. The adjustment comes as analysts at TD Cowen shift their preference towards gas-weighted equities, in response to recent changes in the oil market. According to InvestingPro data, six analysts have recently revised their earnings expectations downward for the upcoming period, with current analyst targets ranging from $44 to $68.
The downgrade was influenced by a $10 per barrel drop in West Texas Intermediate (WTI) oil prices following new tariff announcements and OPEC's decision to release spare capacity. These developments have led to increased market volatility and have put particular stress on Occidental Petroleum's stock, which has declined over 21% in the past week. InvestingPro analysis indicates the stock is currently trading in oversold territory, with the shares hovering near their 52-week low of $37.67.
TD Cowen's analysts noted that Occidental Petroleum's shares have faced heightened pressure over the last few days due to challenges specific to the company. The new price target of $45 per share reflects a valuation of 0.75 times the firm's sum-of-the-parts (SOTP) valuation of $60 per share. Despite recent pressures, InvestingPro's Fair Value analysis suggests the stock is currently undervalued, while the company maintains strong fundamentals with a 63% gross profit margin and has maintained dividend payments for 52 consecutive years.
The revised price target suggests a more cautious outlook on the company's stock, as the analysts recalibrate their expectations in light of the changing dynamics in the oil market. The decline in WTI pricing and the subsequent impact on Occidental Petroleum's share performance have been significant factors in the analysts' reassessment.
The new rating and price target by TD Cowen indicate a shift in sentiment towards Occidental Petroleum's near-term prospects. The firm's latest commentary highlights the interplay between geopolitical events, commodity prices, and individual corporate performance in influencing analyst ratings and investor expectations.
In other recent news, Occidental Petroleum has made significant strides with the U.S. Environmental Protection Agency's approval of permits for its Direct Air Capture project, STRATOS, in Texas. This facility is expected to capture up to 500,000 tonnes of carbon dioxide annually, marking a first for such a project in the United States. Additionally, Occidental has met its near-term debt repayment goal, having paid off $4.5 billion and signed agreements to divest $1.2 billion worth of assets, which will aid in further reducing debt. Fitch Ratings revised Occidental's outlook from Stable to Positive, maintaining its 'BBB-' rating, noting the company's accelerated debt repayment strategy and its recent asset sales. Furthermore, Occidental has adjusted the exercise price of its publicly traded warrants, lowering it from $22.00 to $21.30 per share, which remains open until March 31, 2025. Lastly, the Carlyle Group (NASDAQ:CG) is reportedly seeking a buyer for its Colombian oil producer, SierraCol, with an anticipated sale price of $1.5 billion, following its acquisition of assets from Occidental. These developments reflect Occidental's ongoing efforts to enhance its financial and operational stability.
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