Occidental Petroleum (NYSE:OXY) shares climbed 3.8% in pre-market trading on Wednesday after Evercore ISI upgraded the oil producer by two notches, citing a stronger balance sheet and improved cash generation prospects.
Evercore Turns Bullish on Free Cash Flow Outlook
Evercore upgraded Occidental to Outperform from Underperform and increased its price target to $65 from $58.
The broker said the company’s significantly lower leverage and improved capital efficiency have materially strengthened its long-term free cash flow outlook. Following a prolonged period of underperformance relative to both crude oil prices and large-cap exploration and production peers, Evercore believes Occidental is now better positioned to benefit from supportive commodity market conditions and eventually resume meaningful shareholder returns.
The firm forecasts free cash flow per share growth of around 8% annually through 2030, assuming West Texas Intermediate crude remains at $75 per barrel and production volumes stay broadly unchanged.
Although that growth rate trails the roughly 20% compound annual growth projected for Chevron (NYSE:CVX), ConocoPhillips (NYSE:COP), EOG Resources (NYSE:EOG) and Diamondback Energy (NASDAQ:FANG), Evercore believes lower well costs and a slower base production decline should reduce maintenance capital requirements and support stronger long-term cash generation.
The broker also expects Occidental to restart share repurchases during the second half of 2028.
Commodity Strength Supports Shares
Occidental did not release any significant corporate updates or earnings news on Wednesday, with the stock’s gains instead reflecting stronger oil prices and improving sentiment toward the energy sector.
The shares had fallen roughly 15% over the previous month, leaving valuations at more attractive levels ahead of the recent rebound. Analysts also continue to forecast a substantial year-over-year improvement in earnings for the current quarter, while Wells Fargo reaffirmed its Buy rating on the stock earlier this month.
Energy Sector Outperforms Broader Market
Occidental’s advance contrasted with broader weakness across U.S. equities, as the S&P 500 slipped 0.5%, the Dow Jones Industrial Average eased 0.3% and the Nasdaq declined 1.2%.
The move highlights the energy sector’s resilience amid rising crude prices, with producers benefiting from renewed supply concerns. Given Occidental’s relatively high sensitivity to oil prices, its shares tend to react more sharply than many of its industry peers during periods of commodity price volatility.
The combination of stronger crude prices, a discounted valuation following last month’s sell-off and improving analyst sentiment helped lift the stock ahead of the opening bell.