Key points
- Warren Buffett and Berkshire Hathaway bought more Occidental Petroleum in December.
- Total ownership amounts to approximately 30%; The purchases may indicate that another debt reduction will be revealed in the fourth quarter release.
- Analysts and institutions are helping to support the stock price in 2024.
After six months of inactivity, Warren Buffett and Berkshire Hathaway (NYSE: BRK.A) jumped at the bait and bought more Occidental Petroleum (NYSE: OXY). The aftertaste was a multi-year share price decline not seen since the company began buying up common stock. Purchases in mid-December amounted to nearly 8 million shares, bringing the total to about 30% of shares. This is in addition to equal guarantees of approximately 10% of the stock and the central preferred stock of Berkshire’s investments. Preferred stock purchased in 2018; Occidental has used capital to assist in acquisitions that result in increased cash flow and shareholder value gains today.
Buffett is impressed by Occidental’s improved financial condition
Berkshire’s purchases are noteworthy for more than their face value. This data underscores Occidental’s strong and rapidly improving financial health, and may also indicate that another debt reduction is coming soon. Coincidentally, Berkshire Hathaway began purchasing common stock when Oxy began paying down its debt, primarily the preferred stock mentioned before.
Occidental’s third-quarter 2024 results were mixed, with revenue down due to lower oil prices but lower than expected and worsening by a significant margin. The revenue strength was driven by production ramp-up, which also helped the profit margin. The final results included 3,000 basis points of outperformance and sufficient free cash flow, approximately $1.5 billion, to maintain its capital return and debt reduction outlook.
Balance sheet highlights include increased net debt offset by a 3x cash accretion, and increased receivables, inventory, current and total assets. Total assets increased by 20%, only partially offset by increased liabilities, resulting in equity rising by approximately 18%. In terms of cash and leverage, the company had more than $1.8 billion in cash and net debt leverage of less than 0.75 times equity.
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Other benefits of Occidental’s cash flow and balance sheet improvement are the ability to pay dividends and maintain annual distribution increases. The company is paying about 25% of its 2024 earnings forecast, and earnings are expected to grow in 2025, so there’s plenty of room for cash flow. The next dividend increase is scheduled for the first quarter of 2025 and is likely to be another double-digit increase due to earnings growth expectations. Earnings are expected to grow by about 5% in 2025, but expectations may be low. Economic activity expanded at a pace above target throughout 2024, and is likely to remain strong in 2025, supported by lower interest rates and easing regulatory headwinds.
Analysts and institutions support Oxy’s stock price in 2024
The sell side, including analysts and institutions, are adding to support the OXY stock price in 2024. Analysts have lowered their share price targets this year, but this decline is offset by higher coverage, a moderate buy/buy rating, and a 30% upside potential in consensus. The latest targets suggest the consensus figure is high, but even the lower range provides support, with the lowest target recorded more than 5% above price action in late December.
Regarding institutions, they bought on balance in 2024. Their activity turned bearish in the third quarter but returned to trend in the fourth quarter, with net activity amounting to about 10% of the market capitalization for the year. Energy stocks. Institutions, excluding Berkshire Hathaway, own about 50% of the shares, providing a significant tailwind to their side. Net interest, including Berkshire’s holdings, is approaching 80% and rising.
Occidental Petroleum bounces off support target: An upside rally is likely
Occidental’s stock price has rebounded from a multi-year low in December, and is now pointing higher. The MACD and Stochastic are in line with these expectations, as they are both low in their ranges and preparing to release a strong signal. Stochastic is already showing bullish crosses in line with support at current price points; The MACD has not made a crossover yet, but it may do so soon. In this scenario, support at the 30-day moving average will intensify and push the market higher, potentially reaching consensus at $62 by late Q1 or early Q2 2025.
Companies in this article:
| a company | Current price | Price change | Dividend yield | P/E ratio | Consensus rating | Consensus price target |
|---|---|---|---|---|---|---|
| Berkshire Hathaway (BRK.A) | $684,908.50 | -0.4% | nothing | 9.22 | nothing | nothing |
| Occidental Petroleum (Oxy) | $48.56 | +0.7% | 1.81% | 12.65 | He catches | $62.10 |
expertise
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of expertise
Technical analysis, S&P 500; Retail, Consumer, Consumer Staples, Dividend, High Yield, Small Business, Technology, Economic Data, Oil, Cryptocurrency
education
Associate of Arts in Culinary Technology
Past experience
Market watcher, trader and investor for many sites. She founded Passive Market Intelligence LLC to provide market research insights.
