Analyst David Deckelbaum of TD Cowen maintained a Hold rating on Occidental Petroleum, retaining the price target of $45.00.
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David Deckelbaum has given his Hold rating due to a combination of factors surrounding Occidental Petroleum’s recent strategic decisions. The acquisition of OxyChem by BRK for $9.7 billion, while slightly below expectations, is aimed at improving Occidental’s balance sheet by reducing debt and interest expenses. However, this transaction is expected to decrease the company’s free cash flow yield by 2026, which raises concerns about future financial performance.
Despite the reduction in leverage and the potential for Occidental to become a more appealing acquisition target, the deal’s impact on free cash flow and the lower valuation multiple compared to peers suggest a cautious outlook. The sale of OxyChem, which has lower margins and minimal overlap with Occidental’s core exploration and production business, indicates management’s anticipation of a prolonged weak chemical cycle. These factors contribute to the Hold rating, as the company’s strategic moves present both opportunities and challenges in the near term.
In another report released today, Morgan Stanley also maintained a Hold rating on the stock with a $52.00 price target.