OXY - Occidental Petroleum Corporation
38.94 +1.18 (3.13%)
Pre-market: 8:33AM EST
| Previous close | 38.12 |
| Open | 38.11 |
| Bid | 38.13 x 1800 |
| Ask | 38.90 x 800 |
| Day's range | 37.60 - 38.68 |
| 52-week range | 37.60 - 73.64 |
| Volume | 8,402,482 |
| Avg. volume | 8,893,460 |
| Market cap | 33.413B |
| Beta (3Y monthly) | 0.87 |
| PE ratio (TTM) | 26.59 |
| EPS (TTM) | 1.42 |
| Earnings date | 10 Feb 2020 - 14 Feb 2020 |
| Forward dividend & yield | 3.16 (8.29%) |
| Ex-dividend date | 2019-12-09 |
| 1y target est | 51.55 |
- Financial Times
Icahn suffers Occidental legal blow as Buffett buys in
to buy rival Anadarko. A Delaware judge rejected Mr Icahn’s attempt to force Occidental into disclosing financial records in connection with its acquisition. In a judgment handed down on Thursday, the Delaware Court of Chancery said Mr Icahn had failed to provide any evidence of wrongdoing.
- Oilprice.com
Icahn: Occidental Won't Hit Target Without Asset Sale
Activist investor Carl Icahn has urged the Occidental Petroleum management to immediately sell off some of its midstream assets following the $38 billion Anadarko takeover
- Bloomberg
Icahn Says Occidental Won’t Hit Target Without ‘Fire Sale’
(Bloomberg) -- Activist investor Carl Icahn said Occidental Petroleum Corp.’s new target for assets sales won’t be achieved without a “fire sale” that includes its pipeline system, Western Midstream Partners LP, which was already shopped to potential buyers earlier this year.Occidental’s Chief Executive Officer Vicki Hollub said Wednesday in a statement she was “highly confident” the company will exceed the upper end of its $10 billion to $15 billion asset sale plan by the middle of 2020. The oil producer also said it had closed its joint venture with Ecopetrol, raising $1.5 billion in cash and carried capital, and announced $200 million of non-core asset sales.The new timing should be a “slight positive” for Occidental stock because it’s six months ahead of schedule, Leo Mariani, an analyst at KeyBanc Capital Markets Inc., said in a note.Icahn disagreed. The investor, who’s planning a proxy battle for Occidental next year, said in an interview Hollub’s new sales target and the promise of dividend growth “clearly takes stockholders and the market for fools.” Icahn has said he recently reduced his stake in Occidental to 23 million shares, worth roughly $900 million. He owned 33 million shares, or 3.7%, as of June 30, according to data compiled by Bloomberg.“Results are not achieved through endless repetition,” he said. “Instead, they require disciplined and prudent decision-making from the start, which certainly hasn’t occurred here.”A representative for Occidental didn’t immediately respond to a request for comment.A key to beating Hollub’s target is the potential sale of Occidental’s stake in Western Midstream, a pipeline system it inherited in the Anadarko takeover that has a market value of $8.7 billion. The oil producer said it expects to close a “deconsolidation” of Western Midstream by the middle of 2020 along with “the value acceleration of non-strategic or non-core upstream and midstream assets.” The bulk of the asset sale target is made up of an $8.8 billion sale of Anadarko’s African assets to Paris-based Total SA, agreed to in May.Icahn said he believed Hollub assumed Western Midstream was worth more than $15 billion because that’s the valuation she paid for it. “She certainly didn’t do her homework when she bought it from Anadarko,” Icahn said. “Its purchase price valuation is turning out to be a fiction.”The billionaire investor said last week he was planning to launch a proxy fight at Occidental after its $37 billion takeover of Anadarko Petroleum Corp. earlier this year. The billionaire argued the deal, which did not go before a shareholder vote, has put the company’s financial future, including its dividend, at risk if oil prices falter.Shares in Occidental fell about 0.8% in New York to $38.12, giving the company a market value of roughly $34 billion.Hollub said in the statement that she has made debt reduction and protecting Occidental’s dividend her “top priorities” following the Anadarko takeover. The stock is trading at the lowest in about 14 years as investors balked at the amount of borrowing needed to complete the deal, and then questioned whether Occidental can produce enough oil to manage the debt burden.“Hollub and her board should be on notice. Stockholders are watching and fire sales will not be tolerated,” Icahn said, adding that investors will not allow the company to pay down debt “by further punishing stockholders.”To contact the reporters on this story: Scott Deveau in New York at sdeveau2@bloomberg.net;Kevin Crowley in Houston at kcrowley1@bloomberg.netTo contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Christine Buurma, Pratish NarayananFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Zacks
Oil & Gas Stock Roundup: EOG & Occidental Report Q3 Earnings
While the commodity pricing scenario continues to be challenging, both EOG Resources (EOG) and Occidental Petroleum (OXY) benefited from higher year-over-year production.
- Bloomberg
Occidental to Sell Permian Campus After Anadarko Takeover
(Bloomberg) -- Occidental Petroleum Corp. plans to sell a four-story office building in the heart of the Permian Basin and move employees into a nearby one owned by Anadarko Petroleum Corp., the oil producer it bought for $37 billion three months ago.The 213,000 square-foot complex will be vacated by April 2020 and is a “compelling” investment opportunity, according to a marketing document from CBRE Group Inc., the real-estate broker handling the sale alongside Midland-based Moriah Real Estate Co.The property was built in 2014 and is located in Westridge Park on the west side of Midland, near the airport. It’s also close to Anadarko’s campus and directly opposite Chevron, which Occidental outbid to acquire Anadarko. EOG Resources Inc. also has an office nearby.“We have told our employees in Midland that they will be moving into the state-of-the-art building that Anadarko began constructing prior to the acquisition,” Melissa Schoeb, a spokeswoman for Occidental, said by email. “The building is large enough to house our combined workforce and we will begin the move when it’s ready for occupancy.”Occidental is under pressure to sell assets and pay down debt after the acquisition, which has been criticized by investors including billionaire activist Carl Icahn. The stock plunged this week after Chief Executive Officer Vicki Hollub slashed 2020 capital spending by 40%, raising concern that the company won’t pump enough oil to cover dividend payouts and debt service.To contact the reporter on this story: Kevin Crowley in Houston at kcrowley1@bloomberg.netTo contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Mike JeffersFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Bloomberg
Oil Caps Weekly Gain as Traders Shake Off Trump Tariff Comments
(Bloomberg) -- Oil erased an early loss Friday, capping a weekly gain as investors shrugged off a comment by President Donald Trump that the U.S. hasn’t agreed to fully roll back tariffs with China.Futures in New York climbed 1.9% on the week to settle at a six-week high. U.S. equities drifted after Trump said the U.S. hasn’t agreed to a tariff rollback with China, tempering some of the optimism that a preliminary trade deal will be reached next month. Investors have been whipsawed the past two days amid an onslaught of contradictory headlines about progress in the trade war.“The U.S. is still looking to get something done so it’s just an on again, off again thing with bantering back and forth,” said Kyle Cooper, research director at IAF Advisors in Houston. “Optimism regarding the U.S.-China trade deal is the driving force behind it.”Oil has fallen about 14% since hitting this year’s peak in April as the trade spat saps crude consumption and global supplies expand. OPEC and its partners will probably keep output steady when they meet next month as markets are on track to re-balance, according to Goldman Sachs Group Inc. and Trafigura Group Ltd.“OPEC’s ability to cut production and help prices firm has neared its limits and Saudi Arabia might find it difficult to convince other members to deepen product cuts,” said Daniel Ghali, commodity strategist at TD Bank in Toronto. “If OPEC can’t deepen their commitment we are set for an oversupply and that is going to be bearish for prices.”See also: Aramco Taps Billionaire Olayans, Saudi Prince for IPO OrdersWTI for December delivery rose 9 cents to settle at $57.24 a barrel on the New York Mercantile Exchange.Brent for January settlement rose 22 cents to $62.51 a barrel on the London-based ICE Futures Europe Exchange. The global benchmark crude traded at a premium of $5.25 to WTI.“The U.S.-China trade talks are heading in the right direction” but “there are still several obstacles that will need to be overcome,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. in London. “The road to a final resolution will be bumpy. The upside for the risk-asset complex is limited and the current momentum is built on wobbly foundations.”Rolling back tariffs would pave the way for a de-escalation in the trade war that’s cast a shadow over the world economy. China’s key demand since the start of negotiations has been the removal of punitive tariffs, which by now apply to the majority of its exports to the U.S.“If anything, Trump’s statements were a dose of reality,” said Ashley Petersen, oil market analyst at Stratas Advisors in New York. “Investors got a little too optimistic and too excited and spiked these prices and now we are seeing a rollback as the White House comes out with fairly firm statements.”To contact the reporter on this story: Jacquelyn Melinek in New York at jmelinek@bloomberg.netTo contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Mike JeffersFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Bloomberg
Icahn to Plan Proxy Fight at Occidental After Cutting His Stake
(Bloomberg) -- Carl Icahn plans to launch a proxy fight at Occidental Petroleum Corp. following cuts to the company’s budget this week that may put its dividend at risk because of debt incurred in its $37 billion takeover of Anadarko Petroleum Corp.The activist investor said in a letter to shareholders Friday he plans to begin his campaign ahead of Occidental’s annual general meeting next year, confirming an earlier report from Bloomberg.“We fully intend to run a proxy fight, and if elected, work to right this teetering ship,” Icahn said in the letter.The investor once again centered his criticisms on Occidental Chief Executive Officer Vicki Hollub and the company’s board. He argued they have overseen the erasing of more than $21 billion in market value since news broke in mid-April that Occidental would engage in a bidding war for Anadarko. He referred to the deal as the “OxyDarko Disaster.”Icahn said he recently reduced his stake in Occidental to 23 million shares, worth roughly $900 million. He owned 33 million shares as of June 30, according to data compiled by Bloomberg.“I have no faith in Hollub or her board, and even though I do believe that OXY owns good assets, I draw the line at exposing more than $1 billion to a CEO and board who have gambled the company to further, in my view, their own agendas –- all at the expense of stockholders,” Icahn said.The stock gained as much as 2.2% Friday. It was up about 1% to $39.39 at 12:59 p.m. in New York trading, giving the company a market value of about $35.2 billion.A representative for Occidental didn’t immediately respond to a request for comment.Occidental’s stock plunged this week after Hollub slashed 2020 capital spending 40%, leaving analysts concerned there would be enough oil to meet targets for production, debt reduction and the dividend.While Hollub said protecting the payout is her “top priority,” analysts at JPMorgan Chase & Co. said a dividend cut would be prudent given the company’s debt burden.“The underlying assets are solid, but the free cash flow/dividend/leverage profile simply does not work,” JPMorgan’s Phil Gresh said in a note on Nov. 6. He recommended Occidental reduce the payout by two-thirds.Icahn believes the Anadarko deal risks the future of the company if oil prices falter. He estimates that for every $1 decline in the price of a barrel of oil, the company will lose $260 million in free cash flow. Occidental’s financial position puts its dividend is at risk, he said.The billionaire investor had previously sought to replace four Occidental board members, including Chairman Eugene Batchelder, this year but failed to win sufficient support from shareholders to push ahead.Occidental is this year’s worst performer on the S&P 500 Energy Index.(Updates with details from Icahn letter starting in first paragraph.)\--With assistance from Kevin Crowley.To contact the reporter on this story: Scott Deveau in New York at sdeveau2@bloomberg.netTo contact the editors responsible for this story: Liana Baker at lbaker75@bloomberg.net, Matthew Monks, Simon CaseyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Financial Times
Icahn cuts Occidental stake but vows to pursue board seats
Carl Icahn re-upped his threat to launch a proxy fight at Occidental Petroleum, likening its governance to that of the shared office group WeWork in a new missive attacking its acquisition of rival shale oil producer Anadarko. The billionaire investor said he would continue his fight to add new members to Occidental’s board, even as he cut one-third of his stake in the company.
- Zacks
Noble Energy (NBL) Q3 Loss Narrower Than Expected, Sales Lag
Noble Energy's (NBL) Q3 loss is narrower than expected. The company lowers its 2019 capital expenditure guidance, indicating that its important projects are close to completion.
- GlobeNewswire
Occidental Announces Dividend
HOUSTON, Nov. 06, 2019 -- Occidental Petroleum Corporation (NYSE:OXY) said today that its Board of Directors has declared a regular quarterly dividend of $0.79 per share on.
- Investing.com
Stocks - Trade Uncertainty Takes the Fizz out of Rally
Investing.com – Many investors want or expect stocks to move higher, but a little buyer reluctance took over the stock market on Wednesday.
- Zacks
Devon (DVN) Tops Q3 Earnings Estimates, Raises Guidance
Devon Energy's (DVN) Q3 earnings are better than expected on the back of strong production from its U.S. assets and cost-cutting initiatives.
- Market Realist
Occidental Petroleum Earnings and Icahn versus Buffett
On November 4, Occidental Petroleum (OXY) released its Q3 earnings after markets closed. The battle between Carl Icahn and Warren Buffett is heating up.
- Bloomberg
Oxy Swaps Moxie for Austerity in 2020
(Bloomberg Opinion) -- Occidental Petroleum Corp.’s swing from aggressive offense to deep defense has taken about six months. In May, it elbowed aside much bigger Chevron Corp. to capture Anadarko Petroleum Corp. On Tuesday, it laid out plans to cope with the aftermath.The messiness of Oxy’s third-quarter results, the first to include Anadarko, was their saving grace. Earnings missed consensus estimates by a mile, but the panoply of moving parts, including merger expenses, makes the number almost meaningless. Far more important is Oxy’s plan for 2020, which can be summed up in one word: austerity.The company took the unusual step of providing details about spending plans for next year, something it normally saves for the fourth-quarter call. There is a simple reason for this: The stock yielded north of 7% for much of the period since the Anadarko deal closed in early August. There is a fine line between a yield that looks unusually attractive and one that just looks unsustainable, and Oxy has been walking it.So while the mantra of favoring free cash flow over growth can be heard pretty much everywhere in the oil business these days, Oxy is shouting it a little louder. Analysts were forecasting capital expenditure of $7.5 billion in 2020, according to figures compiled by Bloomberg. Oxy’s target is at least $2 billion lower than that, a figure that happens to cover three quarters of the annualized dividend payment.Lower capex comes with a catch: guidance for production growth in 2020 is now set at 2% compared with the 5% target mentioned during the Anadarko pursuit. That said, the budget still implies a productivity gain of roughly 16% compared with the consensus forecast, assuming the latter includes capex for Western Midstream Partners LP; Oxy’s budget does not. Such synergies are, of course, the basis of Oxy’s argument for buying Anadarko in the first place, and much of Tuesday’s call was taken up with emphasizing early realizations of those and further benefits to come. As has been the case with many other E&P acquirers in the past year or so, however, Oxy isn’t getting the benefit of the doubt. As of lunchtime Tuesday in New York, the stock was down almost 6%, making it the worst performer of any size in the sector apart from Chesapeake Energy Corp. — which trumped everyone with a going-concern warning.The fact remains that Oxy stretched itself enormously to win Anadarko just as the outlook for oil soured. In doing so, it also took on high-priced financing from Warren Buffett that looks set to swallow 40% of the current value of the deal’s cost savings (see the math here). Payments on Buffett’s preferred stock took almost half of Oxy’s adjusted net income in the third quarter. Having begun the year trumpeting reasonable growth balanced with high payouts, Oxy now offers low growth to protect payouts.In short, having hurt its credibility with investors, Oxy still has a lot to prove in winning it back. And as next year’s guidance shows, that finely balanced dividend yield will have to do much of the work in the meantime.To contact the author of this story: Liam Denning at ldenning1@bloomberg.netTo contact the editor responsible for this story: Daniel Niemi at dniemi1@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
- Oilprice.com
Oil Bulls Are Back As Crude Prices Inch Towards $60
It seems that bullish sentiment is finally returning to oil markets with trade war discussions making progress and OPEC suggesting that it will cut deeper in December
- Bloomberg
Occidental Drops as Anadarko Growth Comes Under Scrutiny
(Bloomberg) -- Occidental Petroleum Corp. dropped the most in almost five years after a 40% budget cut raised concerns the oil driller won’t lift output fast enough to reduce debt incurred during the Anadarko Petroleum Corp. takeover.Shale drilling in the U.S. Permian Basin will account for the biggest chunk of cutbacks, even though it’s Occidental’s key growth driver and reason for the deal. The slowdown means Occidental will increase output just 2% in 2020 and 5% the year after, though the Houston-based company will take a “flexible” approach depending on oil prices and debt ratios, Chief Executive Officer Vicki Hollub said on a call with analysts.“They’re going to get back in growth mode in 2021 but you’re hammering spending so hard in 2020 that it’s a little hard to believe these numbers,” said Leo Mariani, an analyst at KeyBanc Capital Markets. “There’s some expectations that’s going to have a long-term impact on production growth.”The third-quarter results was Hollub’s first as CEO of the combined company and an opportunity to turn investor sentiment around the $37 billion deal, which is saw her outbid Chevron Corp. in the biggest transaction of her tenure. Hollub attempted to calm fears over the company’s debt pile by insisting her team “very aggressively” pursuing asset sales to raise cash, particularly Western Midstream Partners LP, which has a market value of about $9.6 billion.But her comments had little effect on the stock, which plunged 5.1% by 12:35 p.m. in New York. That brings the year’s total decline to almost 32%, making Occidental the worst performer in the S&P 500 Energy Index. West Texas Intermediate is up 26% in the period.What Bloomberg Intelligence says:Initial 2020 guidance suggests weak production growth on a sharper-than-anticipated decline in the capital program to a $5.4 billion midpoint from $9 billion in 2019. Upstream gains from Permian Resources will drive the rise in volume, but low- to mid-single-digit growth is soft.Vincent Piazza, senior analyst, U.S. oil & gasRead the research here.The combined Occidental-Anadarko entity will spend about $5.4 billion next year, down from the pro forma $9 billion the companies would have spent this year, according to a presentation. Expenditures in Occidental’s premier theater of operations, the Permian Basin, will drop by half to $2.2 billion.“Occidental did cut capital expenditure but they also had to cut the production forecast for 2020,” said Jason Gammel, a London-based analyst at Jefferies LLC. “It’s a change in expectations relative to what was discussed at the time of the transaction.”The steep budget cut came after third-quarter earnings fell well short of forecasts. Per-share profit, excluding some one-time items, was 11 cents, compared with the 38-cent average of 24 analysts’ estimates. Among the contributing factors cited by Occidental were takeover costs, asset writedowns and proceeds from a pipeline sale.Raising cash from Occidental stake in Western Midstream is now near the top of Hollub’s to-do-list. In a tough market for asset sales, she said her team would employ “creativity” to get a deal done. In the meantime, Occidental is structuring the company as a standalone entity, said Oscar Brown, senior vice president for corporate strategy.“We really want people to understand is that we are very focused, we are very intense on ensuring that we get the asset sales done because we believe we must get our debt down,” Hollub said. “Making sure that we have dollars either from cash flow or asset sales to lower the debt is critically important for us.”(Updates with CEO’s comment from second paragraph.)To contact the reporter on this story: Kevin Crowley in Houston at kcrowley1@bloomberg.netTo contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Christine BuurmaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Zacks
Occidental (OXY) Q3 Earnings Miss Estimates, Sales Beat
Occidental Petroleum's (OXY) Q3 earnings lag estimates but total production improves significantly due to the acquisition of Anadarko.
- Financial Times
Occidental Petroleum to cut capital spending to pay down debt
Occidental Petroleum plans to slash capital spending — including by half in the US shale heartland of the Permian Basin — as it pays down debt amassed in its blockbuster acquisition of Anadarko Petroleum. The company on Monday set out a budget for no more than $5.5bn in capital expenditure in 2020, down from $9bn this year. Occidental forecast oil and gas production would grow by 2 per cent in 2020, well below the 5 per cent growth envisaged when it agreed the $55bn Anadarko takeover six months ago.
- Zacks
Occidental Petroleum (OXY) Misses Q3 Earnings Estimates
Occidental (OXY) delivered earnings and revenue surprises of -73.17% and 3.18%, respectively, for the quarter ended September 2019. Do the numbers hold clues to what lies ahead for the stock?
- GlobeNewswire
Occidental Announces 3rd Quarter 2019 Results
HOUSTON, Nov. 04, 2019 -- Occidental Petroleum Corporation (NYSE:OXY) today announced its third quarter 2019 results. The announcement and financial schedules can be accessed.
- Bloomberg
CEO Behind Shale Megadeal Faces Investor Scrutiny
(Bloomberg) -- Vicki Hollub is set to face investors for the first time since leading Occidental Petroleum Corp.’s controversial $37 billion purchase of Anadarko Petroleum Corp.On an earnings call on Tuesday, Occidental’s chief executive officer will need to show hard evidence that her plan for the merger is working, after drawing the ire of activist investor Carl Icahn and other shareholders for denying them a vote on the deal. The stock has plunged about 35% since April, when Occidental was first said to be pursuing the takeover. It’s this year’s second-worst performer on the S&P 500 Energy Index.First and foremost, investors want to see how Hollub plans to service almost $22 billion of borrowing and $10 billion of preferred shares used to fund the acquisition.“What the market really needs to hear is a clear path for paying down debt and getting the balance sheet in better shape at various crude prices,” said Noah Barrett, a Denver-based energy analyst at Janus Henderson Group Plc, which manages $360 billion including Occidental shares. “If crude prices pull back to sub-$50, does that screw up the whole delevering plan?”Hollub’s pursuit of Anadarko made her the talk of the industry earlier this year. She jetted around the world to strike deals with Warren Buffett and Total SA CEO Patrick Pouyanne as part of a successful attempt to break apart an agreement Anadarko had signed with Chevron Corp., a rival five times bigger than Occidental. The acquisition completed in August was the industry’s biggest since Royal Dutch Shell Plc bought BG Group in 2016, and by far the largest-ever among shale explorers.But so far Hollub’s feat has come at a huge cost to her investors, with the stock hitting an 11-year low last month. The $10 billion of preferred shares sold to Buffett’s Berkshire Hathaway Inc. came with an 8% dividend yield.By 2021, Occidental expects to generate about $1 billion in excess cash after its dividend with West Texas Intermediate crude at $50 a barrel. That may be too long for many shareholders to wait.Here are three developments that could help Hollub rebuild trust:Private equity firms including Blackstone Group Inc., Apollo Global Management Inc. and KKR & Co. are interested in buying Occidental’s Western Midstream Partners LP pipeline unit, people familiar with the matter said in September. The company, which has more than 15,200 miles of oil and gas conduits across the Midwest and Texas, has a market value of about $10 billion.Showing progress toward $3.5 billion of annual cost savings from the merger will also be key. The figure comprises $2.4 billion of capital spending cuts and $1.1 billion of overhead reductions.Improved well results are another important part of Hollub’s rationale for the deal. She’s betting Occidental could drill better wells than Anadarko to improve efficiency.Occidental is scheduled to release its third-quarter results after the market closes on Monday. Hollub and her senior management will hold a conference call with analysts at 11 a.m. New York time the following day.The shale giant is expected to post adjusted earnings of 38 cents per share, according to the mean of 24 analyst estimates compiled by Bloomberg. It has beaten expectations in all but one of the last 10 quarters.Occidental’s shares rose 3.1% to $43.58 at 9:46 a.m. in New York trading. (Updates with share price in last paragraph)To contact the reporter on this story: Kevin Crowley in Houston at kcrowley1@bloomberg.netTo contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Carlos Caminada, Joe CarrollFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Investing.com
Top 5 Things to Know in the Market on Monday
Investing.com -- Saudi Arabia kicks off the Aramco IPO, McDonald's fires its CEO and Wilbur Ross makes nice on auto tariffs, sending Asian and European markets flying. Plus Christine Lagarde heads to the lions' den (Berlin) to deliver her first speech as head of the European Central Bank. Here's what you need to know in financial markets on Monday, 4th November.
- Bloomberg
Buffett’s Peak Quarter Brings New Records on Profit and Cash
(Bloomberg) -- Warren Buffett’s third quarter in many ways marked a new peak.To start, Berkshire Hathaway Inc.’s operating profit topped its best levels. That was lifted by record earnings from BNSF railroad, his biggest-ever acquisition. Gains on his stock bets pushed the conglomerate’s 2019 net income to a staggering $52 billion, making Berkshire the most profitable public company in the world.And the legendary investor now has more cash than ever to play with: $128 billion. That’s the record which has Berkshire’s stock languishing as investors grapple with a question amid all the superlatives: What comes next?“Berkshire has sort of an embarrassment of riches,” Cathy Seifert, an analyst at CFRA Research, said in an interview. “That cash might be burning a hole in their pocket and it’s prudent for them to be careful, but at some point, it almost becomes a burden to the extent that it’s going to drag down their overall returns.”Buffett, 89, has built the most valuable public company outside of the West Coast with major businesses in industries from energy and insurance to car dealerships and jewelry. Now he faces the rare issue where he can write a single check for $10 billion and face questions on whether he’s being aggressive enough.Buffett’s cash pile climbed again in the quarter, and his liquidity brings him potentially lucrative deals like crisis-era bets on Goldman Sachs Group Inc. and General Electric Co., and the third quarter’s $10 billion investment in Occidental Petroleum Corp. that allowed a deal with Anadarko Petroleum Corp.But aside from the Occidental bet, Buffett was a net seller of stocks in the quarter and deals spurred by turmoil are harder to find with the S&P 500 Index hitting fresh highs. And Berkshire hasn’t kept pace this year. Berkshire’s Class A shares are up 5.7% this year through Friday, short of the 22% gain in the S&P 500.The period also provided examples of the limits Buffett faces in trying to put cash to use to continue the outsized growth that made him famous. He’s pushed further into financial stocks, but in his two biggest stakes, he’s right around regulatory caps on bank ownership. With Bank of America Corp., he applied for permission to potentially boost his holding; on Wells Fargo & Co., he sold shares in the quarter.Buffett has conceded that the immediate prospects for buying up businesses isn’t good amid “sky-high” prices. But he said he still hungers for an “elephant-sized acquisition.”Buffett benefits from being selective on what deals he chooses, even if it means he spends time waiting around with $128 billion sitting in cash and Treasury bills, said shareholder Thomas Russo.“The Occidental thing came to Berkshire, no one else, for a reason --- they wanted his stamp,” Russo, who invests in Berkshire through his firm Gardner Russo & Gardner, said in an interview. “That stamp is only valuable if people think that the investments that he makes have been well-scrubbed, rather than rushed through.”While Buffett’s been stymied on the large acquisition front in recent years, he’s been able to put some money to work in the stock market. In recent years, Berkshire’s snapped up shares of JPMorgan Chase & Co. and Apple Inc. One of Buffett’s investing deputies even purchased shares of Amazon.com Inc. this year. But there are limited stocks that even have the potential to move the needle.There are roughly 55 U.S. companies Buffett could invest $10 billion in and remain under his preferred 10% ownership threshold. He already owns a stake in 13 of them and has previously bet on at least another eight. About a dozen of the companies would be considered technology investments, a sector Buffett’s started to venture into after years of trying to avoid the industry.“The anchor of size is just an enormous issue,” said Paul Lountzis, president of Lountzis Asset Management which oversees more than $200 million including investments in Berkshire stock. Lountzis said Buffett’s track record and ability to adapt reassures him. Still, “he’s so big now, where’s he going to deploy things? And where can things go from here? It’s a real challenge.”And such sizable stakes can make Berkshire less nimble. Buffett acknowledged as much with this year’s struggles at Kraft Heinz Co., as he said in February ditching a stake of more than $10 billion would be complicated.“You dance like an elephant, not like some guy on ‘Dancing With The Stars,’” Buffett said.As crisis-era bets such as his equity derivative wagers have started to run out, Buffett’s sought other ways to deploy capital. Berkshire’s board loosened its buyback policy last year. That’s allowed him to repurchase $2.8 billion over the course of 2019. Those moves have been relatively modest -- JPMorgan spent more than $6 billion on net repurchases in the third quarter alone -- but it’s a marked change for an investor that’s preferred to spend his money buying operating businesses or snapping up stocks of other companies.The widest performance gap between Berkshire and the S&P 500 in recent years could give Buffett more incentive to jump into the market for his own stock.“There isn’t a lot of opportunity” for big deals, Jim Shanahan, an analyst at Edward Jones, said in an interview. “All the more reason to question, given the valuation for the stock, why they haven’t been more aggressive in the market buying back their own shares. It could represent the best use of cash right now and it could represent the easiest path for them to deploy capital.”(Adds Buffett’s stock holdings in seventh paragraph.)To contact the reporter on this story: Katherine Chiglinsky in New York at kchiglinsky@bloomberg.netTo contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Linus ChuaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Zacks
Occidental (OXY) to Report Q3 Earnings: What's in the Cards?
Occidental Petroleum (OXY) is likely to have witnessed decline in commodity prices, higher interest expenses and debt burden in Q3.
