Occidental Petroleum Will Move Higher in 2025 Say Analysts

Key Points

• Lower oil prices hurt Occidental Petroleum's revenue and profits, but operational gains provide support.
• Strong cash flow enables debt reduction, dividends, and shareholder equity growth.
• Analysts' outlook and Berkshire Hathaway's buying signal a market bottom and potential rebound.

Occidental Petroleum NYSE: OXY is showing signs of a strong comeback. The stock is positioned for a potential breakout after a market correction to long-term lows—coinciding with Warren Buffett’s strategic entries. Key drivers include the company’s financial strength, increasing capital returns, bullish analyst sentiment, and, of course, Buffett’s continued confidence in OXY.

Berkshire Hathaway recently made another calculated buy in February, reinforcing the December bottom—another instance where Buffett’s purchases signaled a key turning point. This latest addition, worth $35.725 million, nudges Berkshire’s stake closer to 29% of the company, a clear indication of confidence in Occidental’s future.

Occidental Petroleum: Positioned for Profitable Growth

Occidental’s Q4 earnings highlight the company’s strategic realignment, showcasing operational improvements that offset price-driven revenue declines. Despite a 9% YoY drop in revenue to $6.48 billion—missing estimates by 500 basis points—efficiency gains and debt reduction helped widen margins and boost profitability.

Adjusted earnings improved by over 5%, reflecting Occidental’s ability to optimize operations. The key takeaway? Free cash flow remains robust, giving the company flexibility to invest, reduce debt, and enhance shareholder returns.

Occidental generated $3.6 billion in operating cash flow in Q4—over 55% of revenue when factoring in operating capital and 47% otherwise. Free cash flow stood at 21.6%, allowing the company to reach its near-term debt reduction target of $4.5 billion. With this milestone achieved, more capital can now be allocated toward shareholder rewards and future growth.

Strengthening Balance Sheet and Growing Dividends

Occidental’s financial position continues to improve, with rising cash reserves and total assets offsetting liabilities. Equity has grown by 12%, and further gains are expected in 2025.

Dividend investors also have reasons to stay optimistic. The dividend, currently yielding nearly 2% at $49 per share, is poised for steady growth. The 2025 increase of 9% keeps payouts well within sustainable limits—just 30% of earnings—leaving room for further hikes.

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Given Occidental’s improving financials, dividend growth over the next two to three years could accelerate. The company is on track to restore payouts to pre-pandemic levels—potentially doubling the 2025 distribution.

Oil Prices Could Turn a Headwind Into a Tailwind

Crude oil prices remain a crucial factor for Occidental. With WTI currently trading near the lower range of its recent cycle, revenue leverage across the energy sector has been somewhat constrained.

However, recent oil price action in mid-February suggests a potential bottom. If support continues to rise and a price rebound follows, Occidental’s revenue could benefit significantly, further strengthening its already solid cash flow and capital return outlook.

Analysts Predict a 25% Upside From Key Support Levels

Analysts’ sentiment has played a role in Occidental’s stock price movement, with some downward price target adjustments weighing on shares. However, the overall outlook remains positive.

MarketBeat tracks 21 analysts covering the stock, with a consensus Hold rating and a bullish bias. Notably, 33% of analysts rate OXY as a Buy, while only 10% recommend Sell. The average price target has remained steady in the low $60s since mid-2024, implying a 25% upside from the current support level of around $49.

Technical indicators also suggest a breakout may be imminent. The MACD and stochastic indicators are flashing strong buy signals, reinforcing the bullish case. Should momentum continue, the stock could reach its first resistance target of $51.85 before its Q1 2025 earnings report.