Occidental vs. Hess: Which Energy Stock Deserves a Spot in Your Folio?

Zacks Research suggests Occidental Petroleum (OXY) is a better investment than Hess Corporation (HES) due to its focus on Permian resources, stable international operations, and debt reduction, despite projected earnings declines in 2025. OXY's lower EV/EBITDA valuation (4.87X vs. HES's 7.23X), higher dividend yield (2.33% vs. 1.53%), and recent price performance (+4.5% vs. +2.1%) support this recommendation, while HES faces uncertainty from its pending acquisition by Chevron and a Strong Sell Zacks Rank.

Analysis

The U.S. integrated oil and gas sector offers a robust investment thesis, underpinned by energy security needs, established infrastructure, and supportive regulations, further amplified by efficiencies from the U.S. shale boom. Within this sector, Occidental Petroleum (OXY) and Hess Corporation (HES) present contrasting outlooks. OXY is positioned favorably due to its significant Permian Basin assets, contributing 83% to its domestic production, a strategic emphasis on carbon management, and the financial backing of Berkshire Hathaway. Although OXY faces a projected year-over-year earnings decline of 32.66% for 2025, a subsequent growth of 14.38% is anticipated for 2026. OXY's valuation, with a trailing EV/EBITDA multiple of 4.87X, is notably lower than HES's 7.23X, though slightly above the sector average of 4.59X. It also offers a higher dividend yield of 2.33% and demonstrated stronger recent share performance with a 4.5% gain in the past month. In contrast, Hess Corporation, despite its strategic assets and commitment to sustainable energy, is clouded by significant uncertainty surrounding its pending acquisition by Chevron, which is currently subject to arbitration over disputes related to its Guyana assets. HES is projected for a steeper earnings decline of 38.53% in 2025, followed by 20.14% growth in 2026. While HES boasts a higher ROE of 21.78% versus OXY's 16.6%, its dividend yield is lower at 1.53%. The divergence in their investment profiles is further highlighted by their Zacks Ranks: OXY is rated #3 (Hold), whereas HES is rated #5 (Strong Sell), indicating a preference for OXY at present.

Key Decisions for Investors

• Investors might consider Occidental Petroleum (OXY) as a relatively more compelling investment compared to Hess, given OXY's lower EV/EBITDA valuation against HES, a superior dividend yield of 2.33%, its strong Permian operational base, and active debt reduction, despite the anticipated earnings decline in 2025.
• Exercise significant caution regarding Hess Corporation (HES) due to the material uncertainty introduced by the ongoing arbitration related to its Guyana assets in the Chevron acquisition and its current Zacks #5 (Strong Sell) rating; awaiting resolution of this dispute is prudent before making new investment commitments.
• Closely monitor the outcome of the HES-Chevron arbitration concerning the Guyana assets, as this will be a critical catalyst for HES's valuation, and track the evolving 2025 earnings forecasts and actual performance for both companies, as these will heavily influence investor sentiment and stock prices.