Occidental Petroleum Corporation (OXY) is slated to report its fourth-quarter 2014 results on Jan 29, 2015. Last quarter, the oil and gas company posted a negative earnings surprise of 5.39%. On average, Occidental Petroleum has reported a 0.41% positive surprise in the last four quarters. Let’s see how things are turning out for the fourth quarter.
Factors Affecting This Quarter
Major headwinds include volatile crude oil prices and an estimated decline in consumption of heating oil and natural gas due to the mild winter this year, as projected by the U.S. Energy Information Administration based on the U.S. National Oceanic and Atmospheric Administration’s reports.
The oil supply glut, which resulted from higher production in the U.S., has negatively impacted global oil prices. Subsequently, Occidental Petroleum’s third-quarter 2014 earnings and revenues decreased due to lower average realized prices for crude oil and a decline in sales volumes.
Occidental Petroleum generates a significant portion of revenues from its oil and gas operations. In the third quarter of 2014, the company’s oil and gas segment contributed 77.6% to the net revenue. If this situation persists, the company’s forthcoming financial results will be impacted adversely.
Earnings Whispers?
Our proven model does not conclusively show that Occidental Petroleum will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. That is not the case here as you will see below.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -1.43%. This is because the Most Accurate estimate is pegged at 69 cents while the Zacks Consensus Estimate stands slightly higher at 70 cents.
Zacks Rank: Occidental Petroleum’s Zacks Rank #5 (Strong Sell), which when combined with a negative ESP, makes an earnings beat unlikely.
We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some stocks in the same sector you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this season:
Valero Energy Partners LP (VLP) has an earnings ESP of +3.33% and a Zacks Rank #2.
Tesoro Corp. (TSO) has an earnings ESP of +1.40% and a Zacks Rank #2.
Enbridge Energy Management LLC (EEQ) has an earnings ESP of +25.81% and a Zacks Rank #3.
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