Last update on 2024-06-05

Occidental Petroleum (OXY) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Occidental Petroleum (OXY) scored a 5/9 in the Piotroski F-Score for 2023, indicating moderate financial strength and operational efficiency.

Short Analysis - Piotroski Score: 5

We're running Occidental Petroleum (OXY) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Occidental Petroleum (OXY) was analyzed using the Piotroski F-Score, a measure from 0 to 9 reflecting a company's financial health. OXY scored 5 out of 9. Here are the major points: - Profitability: Positive net income and cash flow; however, ROA (Return on Assets) has decreased. - Liquidity: Leverage has slightly increased, and the current ratio has decreased, indicating concerns. - Operating Efficiency: Mixed results with operating cash flow higher than net income but a decrease in gross margin and asset turnover ratios. - Shares: Outstanding shares have decreased, indicating potential stock buybacks. Overall, OXY shows signs of profitability, but with notable efficiency and liquidity concerns.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score analysis, Occidental Petroleum (OXY) shows a moderate financial health with some concerns. For investors, it may be worth looking into due to its profitability and potential for shareholder value increases via share buybacks. However, be cautious of the declining ROA, reduced liquidity, and operational inefficiencies. Conduct further research to understand the potential risks and how they may impact long-term performance before making an investment decision.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Occidental Petroleum (OXY)

Company has a positive net income?

Net income, the company's bottom line, is a key indicator of financial health and profitability.

In 2023, Occidental Petroleum (OXY) reported a net income of $4.696 billion, marking a strong, positive outcome. This is a significant recovery journey from the loss reported in 2020 (-$14.831 billion). Notably, the net income values have varied over the past two decades, making the recent positive trend encouraging for investors. Adding 1 point to the Piotroski Score for positive net income.

Company has a positive cash flow?

The criterion checks whether the company generates positive cash flow from operations, indicating effective cash management and operational efficiency.

Occidental Petroleum (OXY) reported a cash flow from operations (CFO) of $12.308 billion in 2023. This figure is positive, which is a compelling indicator of the company’s robust operational health. Historically, over the last 20 years, the company's CFO showcases a general upward trend with a few fluctuations: rising from $3.074 billion in 2003 to this year’s $12.308 billion. This trend underscores effective cash management and consistent operational efficiency. Thus, this criterion adds 1 point to OXY's Piotroski score, reflecting high operational proficiency and solid cash flow generation capability.

Return on Assets (ROA) are growing?

Change in ROA (Return on Assets) is significant for evaluating a firm's asset efficiency. An increasing trend indicates better profitability.

The Return on Assets (ROA) for Occidental Petroleum (OXY) decreased from 0.1802 in 2022 to 0.0641 in 2023. This decline signals a deterioration in the company's efficiency in using its assets to generate earnings. In 2022, the company's ROA was closer to the industry's median ROA of 0.6218 for the same year, reflecting better profitability and asset utilization then. However, the 2023 figures show that Occidential Petroleum lags behind the industry, which displayed a median ROA of 0.4978, indicating the sector is broadly experiencing more stability in asset returns. Historically, OXY has shown variations in its ROA, reflecting its exposure to cyclical oil and gas markets. This data suggests that the company receives a score of 0 for this criterion.

Operating Cashflow are higher than Netincome?

A critical aspect of Piotroski's F-Score is comparing a company's Operating Cash Flow with its Net Income. This comparison highlights the quality of earnings.

Occidental Petroleum (OXY) has an Operating Cash Flow of $12,308,000,000 for 2023, which is significantly higher than its Net Income of $4,696,000,000. This results in a point being added to the F-Score, indicating positive cash flow management. Over the last 20 years, Occidental's operating cash flow has generally been strong, with noticeable peaks in years like 2008, 2011, 2021, and 2023. This consistency further underlines the robust cash flow generation despite fluctuations in net income, such as the stark contrast between 2019 and the tumultuous 2020. Overall, this trend bodes well for the company's financial health and operational efficiency.

Liquidity of Occidental Petroleum (OXY)

Leverage is declining?

Change in Leverage measures the companys ability to manage its debt. A decrease signifies improved solvency.

In 2022, Occidental Petroleum's leverage ratio stood at 0.28. By 2023, it increased slightly to 0.2603, signaling that the leverage has actually increased in the referenced period. Historical leverage data over the last 20 years shows that Occidental Petroleum had managed to keep its leverage comparatively stable except for spikes in 2019 and 2020 - periods marked by external economic considerations. The company needs to ensure a focus on reducing leverage; however, the recent trends of maintaining relatively lower leverage than historical higher values speak positively of their control mechanisms. Nonetheless, according to Piotroski scoring, leverage has increased this period, thus yielding a score of 0.

Current Ratio is growing?

Current ratio measures a company's ability to pay short-term liabilities with short-term assets. It's crucial for liquidity assessment.

In 2023, Occidental Petroleum's Current Ratio was 0.9155, representing a decrease from 1.1455 in 2022. This trend indicates a decline in liquidity, which is concerning as it reflects a reduced capacity to cover short-term liabilities with short-term assets. Over the past 20 years, the company's Current Ratio peaked at 1.6828 in 2014 and has recently trended below the industry's median of 1.1065 in 2023. A value below 1 often signals potential liquidity problems, making this metric critical for future financial health assessments.

Number of shares not diluted?

Change in shares outstanding refers to the variation in the number of shares a company has in circulation. It is essential to consider because changes can indicate actions like stock buybacks or new issuance, impacting shareholder value.

The outstanding shares of Occidental Petroleum (OXY) decreased from 926,200,000 in 2022 to 889,200,000 in 2023. This constitutes a reduction in shares outstanding and thus warrants a score of 1 point in the Piotroski analysis. A lower number of outstanding shares typically signals that the company might be involved in share buybacks, which is often seen as a shareholder-friendly move intended to enhance shareholder value. Moreover, considering the 20-year historical data, one can observe fluctuations but a generally controlled number of outstanding shares, which suggests a strategic approach by the company towards share equity management.

Operating of Occidental Petroleum (OXY)

Cross Margin is growing?

Gross Margin represents the percentage of revenue that exceeds the cost of goods sold. For Occidental Petroleum (OXY), examining the change in Gross Margin from 2022 to 2023 is crucial in determining its operational efficiency.

When comparing 2023's Gross Margin of 0.3578 to 2022's 0.4817, there is a noticeable decrease. Despite fluctuations in industry standards, such a reduction from 48.17% to 35.78% suggests that OXY faced challenges in managing cost efficiencies relative to its revenues. For the Piotroski Analysis, the score for this criterion is set to 0, indicating a negative trend in operational performance. Over the last two decades, their margins have seen significant variation, influenced by market conditions. For instance, during the oil price surge between 2007 and 2008, OXY's gross margin peaked at 68.34%, a stark contrast to their recent performance. Meanwhile, the industry's median margin evolved from 69.76% in 2003 to a relatively weaker 49.78% in 2023. Despite some years where OXY outperformed the industry, the recent downturn is concerning.

Asset Turnover Ratio is growing?

Asset Turnover measures the efficiency of a company's use of its assets in generating sales revenue. High turnover indicates effective use of assets, enhancing profitability.

The Asset Turnover for Occidental Petroleum decreased from 0.4962 in 2022 to 0.3855 in 2023. This is a negative trend, indicating less efficient use of assets to generate revenue over this period. Historically, the asset turnover ratio has fluctuated, with a notable decline from its peak in 2005 at 0.6846, reaching its lowest at 0.1881 in 2020, followed by a partial recovery. This recent decrease may suggest operational inefficiencies or challenges in generating sales from its asset base.