Warren Buffett’s Berkshire Hathaway purchased an additional 8 million shares of Occidental Petroleum (OXY) in December, increasing its total stake to nearly 30%. This move comes after a six-month pause and reflects confidence in Occidental’s improving financial health.
Key Financial Highlights
- Debt Reduction and Financial Strength: Berkshire’s renewed interest coincides with Oxy’s significant progress in paying down debt, which began when Berkshire first started investing. The company maintains a net-debt leverage below 0.75x equity, supported by more than $1.8 billion in cash.
- FQ3 2024 Results: Revenue declined due to lower oil prices but was better than expected. Margins improved significantly, with $1.5 billion in free cash flow enabling sustained capital returns and further debt reduction.
- Balance Sheet Growth: Total assets grew 20% year-over-year, driving an 18% increase in equity. Receivables, inventory, and cash balances showed strong growth.
Dividends and Growth Outlook
- Occidental’s cash flow supports consistent dividend payments, with about 25% of 2024 earnings allocated to payouts.
- A double-digit dividend increase is expected in Q1 2025, backed by an optimistic 5% earnings growth forecast for 2025.
Market Momentum
- Stock Rebound: OXY shares rebounded from multi-year lows in December, with technical indicators signaling potential bullish momentum. Analysts anticipate a price target of $62 by late Q1 or early Q2 2025, fueled by strong economic activity and easing regulatory conditions.