Here's a classic Wall Street move: an analyst raises a price target but keeps a neutral rating. It's like giving someone a higher grade on a test but still telling them not to get too excited. That's essentially what JPMorgan just did with Occidental Petroleum (OXY), a company famously favored by Warren Buffett.
The bank's analyst, Arun Jayaram, bumped the price forecast up to $51 from $50 after Occidental reported third-quarter earnings that beat expectations. The company posted adjusted earnings per share of 64 cents, topping the consensus view of 52 cents, with sales of $6.72 billion also coming in slightly above estimates.
On the operational front, things looked strong. Total average global production hit 1,465 thousand barrels of oil equivalent per day (Mboed), which was above the high end of the company's own guidance. In the crucial Permian basin, production averaged 800 Mboed for the quarter. Looking ahead, Occidental sees total fourth-quarter production landing between 1,440 and 1,480 Mboed.
This is all happening under the watchful eye of the Oracle of Omaha. Recent disclosures show Berkshire Hathaway (BRK) owned nearly 265 million shares of Occidental at the end of the second quarter, giving Warren Buffett a roughly 27% stake in the company. So, when Occidental moves, a lot of people paying attention to Buffett's portfolio take notice.
Despite the earnings beat and solid guidance, something interesting happened: Occidental's shares underperformed the energy sector index. JPMorgan's analyst notes they lagged by about 119 basis points. Why the muted reaction to good news? The answer seems to lie in the fine print of management's commentary.
According to the analyst's note, the company's CFO indicated plans for a strategic capital reallocation starting in 2026. Money is likely to be shifted away from OxyChem (the chemical business) and Low Carbon Ventures (LCV) and redirected toward traditional upstream oil projects. Specifically, about $250 million in reduced LCV spending could go to Gulf of Mexico water flood projects and a ramp-up in activity in Oman. On top of that, up to $400 million in sustaining capital from OxyChem might be funneled into increased Permian basin activity.
This is the kind of pivot that makes investors nervous. It signals a potential pullback from newer, future-focused ventures to double down on the core oil business. However, CEO Vicki Hollub provided a counterbalance, emphasizing that the company would avoid aggressively adding production in what it sees as an oversupplied market. In other words, they're shifting capital, but they're not about to flood the market with new oil.
Perhaps reflecting a more cautious long-term view despite the raised price target, JPMorgan also revised its earnings estimates for Occidental downward. The analyst now sees 2025 EPS at $2.34 (down from $2.56) and 2026 EPS at $2.04 (down from $2.12). The bank's assumptions for future oil and gas prices, however, remained unchanged.
In the end, the market's initial response was a shrug. Occidental shares were essentially flat, up a mere 0.05% at $41.87 following the news. It's a reminder that on Wall Street, sometimes what management says about tomorrow matters more than the numbers they just posted for yesterday.
