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Goldman Sachs analyst Neil Mehta slashed the rating on Occidental Petroleum (NYSE:OXY) to Neutral from Buy after a run-up in shares.
OXY stock has more than doubled since the beginning of the year while the energy benchmark index XLE (NYSE:XLE) is up 31% YTD.
“While we continue to see an attractive FCF outlook for OXY that can allow for further balance sheet improvement and greater capital returns (including higher base dividends + share repurchases), we see less differentiated FCF to current EV following the outperformance relative to peers,” Mehta wrote in a research note.
Still, the analyst sees around a 17% upside from current levels in OXY shares. This is much less than around 40% upside potential Mehta sees in Exxon (NYSE:XOM), ConocoPhillips (NYSE:COP), Hess (NYSE:HES), Pioneer Natural Resources (NYSE:PXD), Diamondback Energy (NASDAQ:FANG), and Coterra Energy (CTRA).
Mehta especially highlighted COP shares with the recent weakness seen as a buying opportunity.
“We remain constructive on Buy-rated COP shares following the pullback in the equity over the last month, with shares down about 30% versus the XLE -23%. In our view, the underperformance has been driven by the sell-off in commodity prices and increased levels of uncertainty around the oil macro and global economy,” he concluded.
OXY shares are down over 2.2% in pre-open Monday while COP stock price is trading 1.7% in the red.
