APA vs. OXY: Which Upstream Energy Stock is the Stronger Bet?

The companies operating in the Zacks Oil and Gas Exploration and Production - United States industry present a strong long-term investment case, driven by rich shale reserves, cutting-edge extraction technologies and sustained global energy demand. Techniques such as hydraulic fracturing and horizontal drilling have unlocked large volumes of unconventional resources, elevating the United States to a leading position in global oil and natural gas production and exports.With energy security becoming increasingly critical, U.S. E&P companies benefit from strategic geopolitical advantages and growing LNG export opportunities. Emphasis on capital discipline, shareholder-focused strategies and improved cost efficiency has bolstered free cash flow. Ongoing industry consolidation and productivity gains further support the sector’s ability to generate consistent earnings and deliver shareholder value, even in a volatile pricing environment. Occidental Petroleum Corporation OXY and APA Corporation APA are prominent U.S. independent oil and gas producers, leveraging strong shale portfolios and strategic international assets to drive cash flow and long-term growth.Occidental Petroleum offers a compelling investment opportunity, driven by its diverse asset base, strong free cash flow generation and strategic focus on low-carbon initiatives, with leading positions in the Permian Basin and valuable assets in some international locations. Occidental maintains resilient production and earnings. The company’s disciplined capital allocation, debt reduction efforts, and investment in carbon capture technologies position it well for long-term value creation, making it an attractive option for energy investors.APA Corporation exhibits promising growth prospects, driven by a diversified reserve base and positive exploration results in Alaska. The acquisition of Callon bolsters its Permian Basin footprint, while the GranMorgu project in Surimane enhances its long-term offshore potential. With a broad geographic presence and strong reserve replacement trends, APA is well-positioned for sustained performance. Its high-quality drilling inventory and ongoing cost-reduction initiatives offer a competitive advantage. Nonetheless, the company faces challenges from commodity price fluctuations, substantial debt and liquidity pressures linked to its capital-intensive strategy.Given that both companies are prominent players in the Zacks Oil-Energy sector, it’s worthwhile to take a closer look at their fundamentals. A detailed comparison will help determine which stock offers a more attractive investment opportunity for investors.APA & OXY’s Earnings Growth ProjectionsThe Zacks Consensus Estimate for APA’s earnings per share in 2025 and 2026 has increased by 3.08% and 2.53%, respectively, in the past 30 days. Long-term (three to five years) earnings growth per share is pegged at 1.05%.Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for Occidental Petroleum’s earnings per share in 2025 has gone up by 4.07% in the past 30 days, and 2026 earnings per share has remained the same in the same time period. Image Source: Zacks Investment ResearchAPA & OXY’s Dividend YieldDividends are recurring payments distributed by a company to its shareholders, offering investors a tangible return on their investment. They serve as a key indicator of a company’s financial strength and stability, often reflecting robust cash flow and steady earnings performance.Currently, the dividend yield for APA is 5.39%, while the same for Occidental is 2.25%. The dividend yields of both companies are higher than the S&P 500’s yield of 1.58%.Return on Equity (ROE)ROE is an essential financial indicator that evaluates a company’s efficiency in generating profits from the equity invested by its shareholders. It demonstrates how well management is utilizing the capital provided to increase earnings and deliver value. APA’s current ROE is 23.22% compared with OXY’s ROE of 16.6%. APA also outperforms the S&P 500 ’s ROE of 17.02%.Debt to CapitalThe Oil-Energy sector is a capital-intensive one, and huge investments are required at regular intervals to upgrade, maintain and expand operations. The usage of new evolving technology also requires investments. Therefore, the companies operating in the sector borrow from the market and add it to their internal cash generation to fund their long-term investments.APA’s current debt-to-capital currently stands at 45.17% compared with Occidental’s debt-to-capital of 42.17%. Both companies are using higher debt to fund their business, as their debt usage is higher than the S&P 500’s debt-to-capital, which stands at 41.07%.ValuationAPA Corporation currently appears to be trading at a discount compared with Occidental Petroleum on a trailing 12-month EV/EBITDA basis. VST is currently trading at 2.68X, while OXY is trading at 4.97X compared with the S&P 500’s 17.42X.Price PerformanceAPA’s shares have gained 9.1% in the last month compared with OXY’s rally of 4.5% and the S&P 500’s return of 4.4%.Price Performance (One month)Image Source: Zacks Investment ResearchConclusionAPA Corporation and Occidental Petroleum are strategically investing in their infrastructure to expand operations and cater to the rising global demand for hydrocarbons.APA’s better return on equity, cheaper valuation, rising earnings estimates and higher dividend yield make it a better choice in the oil and energy space.Based on the above discussion, APA Corporation currently has an edge over OXY, despite the stocks carrying a Zacks Rank #3 (Hold) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report APA Corporation (APA): Free Stock Analysis Report Occidental Petroleum Corporation (OXY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks