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HSBC starts Occidental Petroleum stock, weighs CrownRock deal impact

EditorEmilio Ghigini
Published 04/08/2024, 05:33 AM

Monday, HSBC initiated coverage of Occidental Petroleum (NYSE:OXY) stock, assigning a Hold rating with a price target of $65.00. The firm's analysis is based on a discounted cash flow methodology. The valuation anticipates the completion of the CrownRock transaction by the end of the current year, which is expected to contribute to the company's production and cash flows in 2025.

The forecast by HSBC also assumes that Occidental Petroleum will finalize its asset divestiture program and meet its debt reduction goals by 2026. This could pave the way for the company to potentially resume share repurchases.

HSBC's analyst noted that there are several risks to the company's valuation, including the high concentration of geographic and voting power, the possibility that the CrownRock deal may not close as planned, and the risk that Occidental Petroleum's long-term growth strategy may not scale as expected due to changes in government support.

On the upside, the firm identified potential positive factors for Occidental Petroleum. These include the CrownRock deal closing earlier than expected, stronger performance in oil and gas operations, and higher-than-anticipated margins in chemicals and midstream operations. These factors could accelerate cash flows and enable the company to reduce its leverage sooner than projected.

InvestingPro Insights

In light of HSBC's recent coverage on Occidental Petroleum, examining the company through the lens of current InvestingPro data and tips can provide additional perspective for investors. Occidental Petroleum's market capitalization stands at approximately $61.39 billion, with a P/E ratio of 16.44, reflecting market sentiment and the company's earnings potential. Notably, the stock is trading near its 52-week high, indicating strong recent performance, as evidenced by a price total return of 19.27% over the last three months. This aligns with HSBC's mention of potential positive factors that could accelerate cash flows.

InvestingPro Tips also highlight the company's consistency in maintaining dividend payments for over half a century, which could appeal to income-focused investors. Additionally, Occidental has shown a strong return over the last month, with a 13.9% price total return, complementing the firm's positive outlook on the company's future cash flows and operations.

Investors interested in a deeper analysis can find additional InvestingPro Tips for Occidental Petroleum, which might further inform their investment decisions. Discover more exclusive insights and take advantage of a special offer using the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 6 more InvestingPro Tips available that could provide a more comprehensive understanding of Occidental Petroleum's stock performance and outlook.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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