How High Can Occidental Petroleum Go?

Tickers in this article: OXY

NEW YORK (TheStreet) -- Occidental Petroleum has been one of the better-performing international oil and gas exploration and production companies over the past 12 months.

In April 2013 it traded as low as $79.16, and on Nov. 22 of last year Occidental hit its 52-week high of $99.42. Since then it has traded in a range between $97.84 on the high side and as low as $85.90 on Feb. 5 of this year. Recent price action suggests to me that it may be ready to cool down and head for the lower end of that range.

I'm still a big believer in the company. Occidental is one of the largest U.S. oil and gas companies based on equity market capitalization. Its wholly owned subsidiary, OxyChem, manufactures and markets chlor-alkali products and vinyls. Shares are trading with a trailing price-to-earnings ratio of only 13.2 and a forward one-year PE of about 13.5.

The following one-year chart of Occidental Petroleum highlights some of the compelling reasons its stock price has done so well.


OXY Chart

OXY data by YCharts

The company's quarterly revenue-per-share growth and year-over-year diluted earnings-per-share growth has been stellar. Last quarter its diluted EPS growth was an amazing 392%!

Looking ahead, it appears that Oxy faces some headwinds that are likely to curtail those earnings.

Sterne Agee analyst Tim Rezvan recently tweaked his earnings estimates for companies materially exposed to Permian Basin crude pricing -- and that includes Occidental Petroleum. He's given me permission to quote his comments on Occidental, which I find credible from both a fundamental and technical perspective.