Apple Inc. (NASDAQ: AAPL) Started as Buy at Auriga; target raised to $715 at JPMorgan

Carnival Corporation (NYSE: CCL) named as Bear of the Day at Zacks.

Clean Energy Fuels Corporation (NASDAQ: CLNE) Started as Neutral at Macquarie.

Discover Financial Services (NYSE: DFS) named as Bull of the Day at Zacks.

Express Scripts Inc. (NASDAQ: ESRX) Started as Overweight at JPMorgan.

GNC Holdings Inc. (NYSE: GNC) Raised to Outperform at BMO.

Goldcorp Inc. (NYSE: GG) Started as Neutral at Citigroup.

Groupon, Inc. (NASDAQ: GRPN) Started as Neutral at Stern Agee.

Kinross Gold Corporation (NYSE: KGC) Started as Buy at Citigroup.

Netflix, Inc. (NASDAQ: NFLX) Cut to Equal-weight at Barclays.

Newmont Mining Corporation (NYSE: NEM) Cut to Neutral at Citigroup.

Philip Morris International, Inc. (NYSE: PM) Cut to Neutral at Credit Suisse.

Schlumberger Limited (NYSE: SLB) Raised to Buy at Stern Agee.

The Timken Company (NYSE: TKR) named as Value stock of the day at Zacks.

Urban Outfitters Inc. (NASDAQ: URBN) Raised to Neutral at Citigroup.

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JON C. OGG

Fuel Systems, along with competitors Clean Energy Fuels Inc. (NASDAQ: CLNE) and Westport Innovations Inc. (NASDAQ: WPRT), are driving growth in the use of natural gas in the transportation business. Natural gas producer Chesapeake Energy Corp. (NYSE: CHK) has started a $1 billion venture fund to promote natural gas as an alternative to petroleum-based transportation fuels, and Clean Energy was among the first beneficiaries of that fund.

Fuel Systems, with a market cap of around $550 million, is the smallest of the three and is trying to beef up its offerings to stay in the game. And it may be doing better than that.

The Dresser purchase includes compressed natural gas (CNG) compressor equipment, the acquisition of the CUBOGAS trademark, and a license to use the Dresser name on equipment now to be manufactured by Fuel Systems.

In the past 12 months, Westport’s share price has more than doubled, Clean Energy’s share price has risen 40%, and Fuel Systems’ price has fallen -1.2%. The story is somewhat different since the beginning of 2012. Fuel Systems’ share price has jumped 60% since January 1st, compared with rises of about 37% at both of its competitors.

Partly that’s due to a contract with General Motors Corp. (NYSE: GM) to supply the automaker with 1,200 CNG systems, and part was due to the purchase last week of 375,000 additional shares of the company’s stock by major shareholder Kevin Douglas. Douglas now owns nearly 940,000 shares of Fuel Systems’ 20 million or so shares outstanding. Douglas is also a major holder of Westport, with a reported 2.99 million shares of about 48 million outstanding.

Fuel Systems’ consensus target price is $23.00, and shares are trading today at $27.50. Westport’s target price is $33.50 and shares are trading today at $44.88. Clean Energy trades at $16.93 today, compared with a target price of $15/share. One might conclude that these three companies are more than fully valued.

But neither Westport nor Clean Energy has a positive forward P/E ratio and neither is expected to post a profit in the December or the March quarter.

Fuel Systems is expected to post a profit in both its December and March quarters, and a full year EPS of $0.30 for its fiscal year ended in December. For the current fiscal year, the consensus EPS is $0.89. The company’s forward P/E ratio is a very rich 31.

Westport has garnered most of the attention — and money — in this space for the past year or so. Fuel Systems may be on track to change that.

Paul Ausick

The US DoE has conducted its first-ever “Quadrennial Technology Review” (QTR) and the final report was released yesterday.  While the report doesn’t break any new ground, it does shift the field more than a little toward electric vehicles.

The shift is good for Honda Motor Corp. (NYSE: HMC) and its Civic hybrid, Toyota Motor Corp. (NYSE: TM) and its Prius, General Motor Co. (NYSE: GM) and its Chevy Volt, Ford Motor Co. (NYSE: F) and its Fusion, and even Nissan Motors (OTC: NSANF). The shift away from liquid fuels will affect ethanol makers like Archer Daniels Midland Co. (NYSE: ADM) and Valero Energy Corp. (NYSE: VLO), and a non-committal position on natural gas won’t be much help to Clean Energy Fuels Corp. (NASDAQ: CLNE).

For example, it has long been believed that reducing emissions from stationary sources like power generation plants and industrial plants would be the simplest way to cut overall emissions. Stationary sources account for about 70% of all greenhouse gas emissions in the US.

The QTR wants to put more emphasis on reducing consumption and emissions on the transportation sector. One element of the strategy to change the US transportation sector is to spend more effort on putting more electric vehicles on US roads. From the report:

“DOE is underinvested in the transportation sector relative to the stationary sector (energy efficiency, grid, and electric power). Yet, reliance on oil is the greatest immediate threat to U.S. economic and national security, and also contributes to the long-term threat of climate change. Vehicle efficiency has the greatest short- to mid-term impact on oil consumption. Electrification will play a growing role
in both efficiency and fuel diversification. DOE has particular capabilities in these areas. Within our transportation activities, we conclude that DOE should gradually increase its effort on vehicle efficiency and electrification relative to alternative fuels.”

Unpacking that paragraph leads to a couple of conclusions. First, our oil-driven economy threatens US economic security and the chosen method to fight that is to increase vehicle efficiency. Boosting the Corporate Average Fuel Economy (CAFE) standard to 54.5 miles/gallon by 2025 nearly doubles current fuel economy mandates. The QTR estimates that improvements in vehicle efficiency could save 2 million barrels of oil a day within a decade. That’s about 15% of current US consumption.

The second conclusion one could draw from the cited paragraph is that electricity will be given precedence over other alternative fuels. These other fuels are presumably liquids like algae-derived biofuel and ethanol. As the report notes, “Increasing the production of any alternative hydrocarbon fuel to meaningfully displace petroleum-derived fuels would require dramatic increases in feedstock production.”

The report is even more explicit later, “Because ethanol is neither a total drop-in fuel nor ideal for the heavy-duty vehicle market, and because it already has substantial investment from the private sector, DOE will not give high priority to R&D activities in conversion pathways to produce ethanol.” Technologies such as coal-to-liquids, gas-to-liquids and coal-and-biomass-to-liquids are won’t get any support because their carbon emissions are worse than conventional fuels.

Natural gas as a transportation fuel gets a wave, but no ringing endorsement: “DOE will support the development of new technologies that may make natural gas more applicable for transport. However, there are challenges for natural gas use in transport: infrastructure and competing demand from electrical, heat, and chemical uses.”

The QTR’s view of electric vehicles seems to be that in the short- to medium-term, hybrid electric and plug-in hybrids will reduce oil consumption, but in the long-term, all-electric vehicles are the preferred option because they “de-couple light-duty vehicles from the volatile global oil market.” And it’s there that the DoE wants to focus its efforts.

Paul Ausick

The move will consolidate key value chain components such as fuel supply, customer support and comprehensive maintenance.  This is also an indirect win for Clean Energy Fuels Corporation (NASDAQ: CLNE) as it is T. Boone Pickens’ LNG fueling company for the natural gas powered trucks that he has been promoting so heavily as one tool to get off foreign oil.

Westport and shell noted that the two will use their positions in LNG production and distribution for Shell and LNGV systems and technology for Westport.  The two also said that they will collaborate to develop industry standards for LNG as a new transportation fuel.  This runs parallel with recent efforts announced by Chesapeake Energy Corporation (NYSE: CHK) after it started a fund aimed solely at promoting natural gas as an answer outside of foreign oil in a future U.S. energy policy.

In late morning trade, we have Clean Energy Fuels up almost 9% at $13.25.  Westport was halted, but shares were up 5.5% at $24.09 before the news.  Even Chesapeake is up almost 2% at $31.51 with a stronger stock market today.

JON C. OGG

The new money comes from two Singaporean investment firms, including one owned by government investment company Temasek Holdings. The investment consists of 7.5% convertible notes due in 2016. The notes are convertible to Clean Energy common stock at $15/share. The stock closed at $13.23 yesterday.

Like the funds it received from Chesapeake, Clean Energy plans to use the latest infusion of capital to build out its fueling station infrastructure in the US. Clean Energy currently operates about 224 fueling stations.

Compressed natural gas costs about $1.50-$2.00/gallon less than gasoline, and Clean Fuels is trying to scale up adoption among trucking companies. Converting diesel- or gasoline-powered trucks could reduce carbon emissions by about 20% or more if the natural gas is derived from landfill.

Auto parts maker Westport Innovations Inc. (NASDAQ: WPRT), which also received funding from Chesapeake’s clean energy venture fund, manufactures equipment that is used to convert petroleum-driven vehicles to natural gas-driven ones.  If demand for natural-gas fueled vehicles expands, Westport stands in a good position to benefit.

So does Chesapeake for that matter. More demand for natural gas is needed to help push prices up. Natural gas supply is booming, and the price remains closer to $4/thousand cubic feet than to $5. That’s not good for the gas producers like Chesapeake that would prefer a price nearer $6/thousand cubic feet.

Shares in Clean Energy got a boost in the after-hours market yesterday, but opened barely higher and are trading at $13.30 after the first hour today. The 52-week range is $11.16-$17.85. Westport shares are off about -0.3%, at $22.58, in a 52-week range of $14.25-$28.05.

Paul Ausick

This poses a severe financial risk for many companies who are dependent upon the future of natural gas.  We are tracking United States Natural Gas (NYSE: UNG), Exxon Mobil Corp. (NYSE: XOM), Chesapeake Energy Corp. (NYSE: CHK), Encana Corp. (NYSE: ECA), Devon Energy Corp. (NYSE: DVN), EOG Resources Inc. (NYSE: EOG), and Questar Corp. (NYSE: STR).  Also being tracked are Cheniere Energy, Inc. (AMEX: LNG), Cheniere Energy Partners LP. (AMEX: CQP), Clean Energy Fuels Corp. (NASDAQ: CLNE) and Westport Innovations Inc. (NASDAQ: WPRT).  The losses are brutal, and the weak stock market is not helping things.

United States Natural Gas (NYSE: UNG) has to be one of the worst exchange-traded products out there because of erosion into roll-dates in the futures contracts.  Still, it is actively traded because investors can easily get exposure to natural gas on an intraday basis this way in their normal equity accounts.  This trust is down 3.6% at $9.97 and a new 52-week low of $9.94 was just hit this morning.

Exxon Mobil Corp. (NYSE: XOM) includes XTO after its huge natural gas acquisition.  Shares are down 1.3% at $76.71 and the 52-week range is $55.94 to $88.23.  Chesapeake Energy Corp. (NYSE: CHK) is the largest pure-play for natural gas and it recently even started a venture fund to drive nat-gas interests as part of the next energy policy.  Chesapeake is down a sharp 5.3% at $32.42 and the 52-week range is $19.68 to $35.95.

Encana Corp. (NYSE: ECA) is down 2.9% at $27.40 and close to 52-week lows as that range is $26.02 to $35.25.  Devon Energy Corp. (NYSE: DVN) is down 4.3% at $72.55 but its 52-week range is $59.07 to $93.56.  EOG Resources Inc. (NYSE: EOG) is down 4.1% at $93.96 versus a 52-week range of $85.42 to $121.44. Questar Corp. (NYSE: STR) is down only 1.7% at $17.95 and its 52-week range is $16.03 to $19.06.

Cheniere Energy, Inc. (AMEX: LNG), a liquefied natural gas (LNG) terminal operation, is down almost 9% at $8.89 versus a 52-week range of $2.30 to $12.81.  Its limited partnership is called Cheniere Energy Partners LP. (AMEX: CQP) and that is down ‘only 3.3%’ at $16.55 versus a 52-week range of $15.05 to $24.54.

Clean Energy Fuels Corp. (NASDAQ: CLNE) is T. Boone Pickens’ ‘gas station’ play that he wants to serve the nat-gas trucks as the refuel-stop on major trucking routes.  Shares are down more than 4% at $14.58 versus a 52-week range of $11.75 to $17.85.

Westport Innovations Inc. (NASDAQ: WPRT) is down 4.5% at $22.74 versus a 52-week range of $14.25 to $28.05.  The company specializes in alternative energy engines for trucks, particular those using compressed natural gas.

Dow Jones was calling for a build of 36 billion cubic feet, but the weekly gain reported by the Energy Information Administration was 44 billion cubic feet and U.S. inventories now sit at 2.758 trillion cubic feet.  What is interesting is that Dow Jones noted that this inventory build is still 2.4% under a 5-year average and more than 6% under year-ago levels.

Right now it feels like trying to find the bottom in selling levels is a bit like catching a falling knife.  It is just not very rewarding.  Maybe a bottom is close and maybe not in these stocks, but one thing is a sure bet: Natural gas dipping back under $4.00/tcf does pose a severe financial risk to the business viability of producing and even transporting natural gas.

Natural gas is not alone in its misery today.  Oil is back under $91.00 per barrel as well.

JON C. OGG

Clean Energy Fuels Corp. (NASDAQ: CLNE) is down on moderate volume roughly 1.5% premarket to $16.77, relative to a  52-week range of $11.75-$19.36.

Human Genome Sciences (NASDAQ: HGSI) is up 2.6% premarket to $24.30, relative to a 52-week range of $22.80-$30.48. The European Union’s European Medicines Agency approved the company’s Benlysta drug.

GT Solar International, Inc. (NASDAQ: SOLR) is up nearly 3% premarket to $15.56, relative to a 52-week range of $5.90-$17.50. Piper Jaffray reiterated an “overweight” rating on the stock, with a price target of $24.

Shengkai Innovations, Inc. (NASDAQ: VALV) is up more than 11% premarket to $2.28, relative to a 52-week range of $1.26-$8.50.

Amazon.com Inc. (NASDAQ: AMZN) Started as Overweight at JPMorgan.
Applied Micro Circuits Corporation (NASDAQ: AMCC) Cut to Hold at S&P Equity Research (late-Tuesday).
AU Optronics Corp. (NYSE: AUO) Cut to Underweight at Barclays.
Clean Energy Fuels Corporation (NASDAQ: CLNE) Raised to Buy at BofA/ML.
Domino’s Pizza Inc. (NYSE: DPZ) Reiterated Buy with $30 target at Argus.
Google Inc. (NASDAQ: GOOG) Started as Overweight at JPMorgan.
HollyFrontier Corporation (NYSE: HFC) Started as Outperform at Credit Suisse.
The Interpublic Group of Companies, Inc. (NYSE: IPG) Started as Outperform at Wells Fargo.
Marriott International, Inc. (NYSE: MAR) Raised to Outperform at Baird.
The McGraw-Hill Companies, Inc. (NYSE: MHP) Raised to Buy at Goldman Sachs.
Montpelier Re Holdings (NYSE: MRH) Cut to Underperform as Bear of the Day at Zacks.
Netflix, Inc. (NASDAQ: NFLX) Started as Overweight at JPMorgan.
News Corporation (NASDAQ: NWS) Cut to Hold at Argus.
Quest Diagnostics Inc. (NYSE: DGX) Started as Neutral at JPMorgan.
Teva Pharmaceutical Industries Ltd. (NASDAQ: TEVA) Started as Buy with $58 target at Argus.
United Continental Holdings (NYSE: UAL) Raised to Outperform as Bull of the Day at Zacks.

You are invited to join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Westport Innovations Inc. (NASDAQ: WPRT), a technology provider for engines that run on natural gas, hydrogen, and other biofuels, is another potential beneficiary of Chesapeake’s venture fund. Natural gas producers such as Exxon Mobil Corp. (NYSE: XOM), which now claims the nation’s largest natural gas reserves due to its acquisition of XTO Energy, and Devon Energy Corp. (NYSE: DVN), another major onshore natural gas producer, stand to gain from Chesapeake’s investment as well.

While Chesapeake’s announcement was couched in terms of saving the US from the nefarious deeds of OPEC, natural gas producers have go to do something to lift the price of natural gas to a point where they actually make a profit on the gas. Right now, producers are relying on the oil and natural gas liquids that they can produce as their profit-making products. In order to make a profit on gas production alone, producers need a price above $6/thousand cubic feet, about 25% above today’s price.

Abundant reserves of shale gas make it hard to get any kind of price boost. Production in the Marcellus shale in Pennsylvania and New York has lowered transportation costs for natural gas to the most populated region in the US. Even Kinder Morgan Energy Partners LP (NYSE: KMP) is considering spending several million dollars to reverse the flow of its Rockies Express pipeline which now carries natural gas from Wyoming and Colorado to the eastern US.

Chesapeake and other gas producers need to find more uses for natural gas than simply generating electricity and fueling home heating and cooking. Compressed and liquefied natural gas for transportation, particularly in over-the-road trucks, could provide a solid boost to demand and Chesapeake is trying to prime the pump.

The venture investment of $1 billion over 10 years is already one-third committed, and the projects that have been funded are really just a small drop in a very large bucket. Chesapeake should get credit for what it’s doing, but a lot more is needed if the US is going to replace a significant amount of imported oil with any alternative fuel.

Chesapeake shares closed yesterday at $29.75, within the stock’s 52-week range of $19.68-$35.95. But it’s worth remembering that three years ago the stock was approaching $70/share. That’s where the company would like to be again.

Paul Ausick

A123 Systems, Inc. (NASDAQ: AONE) Raised to Buy at BofA/ML.
AECOM Technology Corporation (NYSE: ACM) Raised to Buy at Argus.
Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN) Kept at Buy but Removed from Conviction Buy List at Goldman Sachs.
American Electric Power Co., Inc. (NYSE: AEP) Raised to Buy at BofA/ML.
China Life Insurance Co. Ltd. (NYSE: LFC) Raised to Neutral at Credit Suisse.
Clean Energy Fuels Corp. (NASDAQ: CLNE) Cut to Underperform at BofA/ML.
ConocoPhillips (NYSE: COP) Reiterated Buy and $95 target at Argus.
Covanta Holding Corporation (NYSE: CVA) Raised to Buy at BofA/ML.
Cree Inc. (NASDAQ: CREE) Cut to Underperform at BofA/ML.
EnerNOC, Inc. (NASDAQ: ENOC) Cut to Underperform at BofA/ML.
FXCM Inc. (NYSE: FXCM) Cut to Sell at Citigroup.
Iron Mountain Inc. (NYSE: IRM) Started as Buy at Stifel Nicolaus.
MetLife Inc. (NYSE: MET) Reiterated Buy with $54 target at Argus.
NYSE Euronext Inc. (NYSE: NYX) Cut to Hold at Argus.
Priceline.com Inc. (NASDAQ: PCLN) Maintained Outperform as Bull of the Day at Zacks.
SandRidge Energy, Inc. (NYSE: SD) Started as Neutral at Baird; Started as Outperform at Morgan Keegan.
SemiLEDS Corporation (NASDAQ: LEDS) Cut to Underperform at BofA/ML.
Valero Energy Corporation (NYSE: VLO) Maintained Strong Buy as Value at Zacks.

Washington Federal Inc. (NASDAQ: WFSL) Cut to Underperform as Bear of the Day at Zacks.

You are invited to join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG