24/7 Wall St. » FTO

Major S&P Index Changes Impacting Shares (MPC, RSH, HHS, HTCH, MRO, AMCXV, BYD, SRT, CVC, HOC, FTO, ENTR, GM)

Administrator — Fri, 24 Jun 2011 11:46:50 +0000

We have some major changes announced by S&P for its three key indexes. Changes are in the S&P 500 Index, S&P Mid-Cap 400 Index, and in the S&P SMall Cap 600 Index.

Marathon Petroleum Corporation (NYSE: MPC) will replace RadioShack Corporation (NYSE: RSH) with only a $1.4 billion market cap in the S&P 500 index, RadioShack will replace Harte-Hanks Inc. (NYSE: HHS) in the S&P MidCap 400 index, and Harte-Hanks with a $530 million market capitalization will replace Hutchinson Technology Inc. (NASDAQ: HTCH) in the S&P SmallCap 600 index as it ranked as #600 by market cap in the index.

Marathon Oil Corp. (NYSE: MRO), a current S&P 500 constituent, is spinning off Marathon Petroleum to its shareholders after the market close on June 30; what’s left of Marathon Oil will remain in the S&P 500 index following the spin-off. S&P SmallCap 600 index and is no longer representative of the small cap market space.

AMC Networks Inc. (NASDAQ: AMCXV) will replace Boyd Gaming Corporation (NYSE: BYD) in the S&P MidCap 400 index; Boyd Gaming will replace StarTek Inc. (NYSE: SRT) in the S&P SmallCap 600 index as StarTek has only a $62 million market cap. Cablevision Systems Corp. (NYSE: CVC) is spinning off AMC Networks after the market close on June 30 and what remains of Cablevision Systems will remain in the S&P 500 index.

Holly Corp. (NYSE: HOC), a S&P SmallCap 600 constituent, will replace Frontier Oil Corp. (NYSE: FTO) in the S&P MidCap 400 index. Entropic Communications Inc. (NASDAQ: ENTR) will replace Holly in the S&P SmallCap 600. Holly is acquiring Frontier Oil in a deal expected to be completed on or about June 30 and it will change its name to HollyFrontier Corporation after the merger.

These index changes matter, but the largest gains generally come from the new additions rather than when a company moves up or down in the indexes. RadioShack is indicated down about 2% and under $13.00; and Entropic is indicated up 3% around $8.55 but no trades have been seen.

As far as the others mentioned in the move, they are ratcheted moves within the various indexes. The surprise is a simple one by our take: No General Motors Corporation (NYSE: GM) yet in the S&P 500 despite a $45 billion market cap.

JON C. OGG

Filed under: Index, Trading Alert Tagged: AMCXV, BYD, CVC, ENTR, FTO, GM, HHS, HOC, HTCH, MPC, MRO, RSH, SRT

Valero Brings Refining Caution After Earnings (VLO, TSO, FTO, WNR, HOC, MRO, HES)

Administrator — Tue, 26 Apr 2011 14:01:30 +0000

With pump prices for gasoline approaching $4/gal everywhere and $5/gal in some US cities, it would seem logical that crude oil refiners are a good bet to do well. It’s not that simple, though, and today’s earnings report from Valero Energy Corp. (NYSE: VLO) gives clues as to why.

The next refiner report will be Hess Corp. (NYSE: HES) on April 27th. Hess is expected to post EPS of $1.95 on revenue of $9.45 billion. On May 3rd, Marathon Oil Corp. (NYSE: MRO) reports earnings, and analysts are looking for EPS of $1.41 on revenue of $21.84 billion. On May 4th, Tesoro Corp. (NYSE: TSO) is expected to report EPS of $0.65 on revenue of $5.83 billion. Three more refiners report on May 5th. Frontier Oil Corp. (NYSE: FTO) is expected to post EPS of $0.98 on revenue of $1.75 billion; Western Refining Inc. (NYSE: WNR) is expected to post EPS of$0.29 on revenue of $1.66 billion; and Holly Corp. (NYSE: HOC) is expected to post EPS of $1.38 on revenue of $2.11 billion. Hess, Marathon, and Holly also have crude production operations.

As for Valero, the company reported EPS of $0.30 on revenue of $26.3 billion. In the same period a year ago, Valero reported an EPS loss of -$0.14 on revenue of $18.5 billion. Analysts were expecting EPS of $0.30 on revenue of $22.3 billion.

In early March, Valero lowered its guidance for the first quarter from $0.47 to $0.15-$0.30. The company also said it would take a $0.61/share charge on hedging losses, which it did. Refining throughput margins increased by $3.93 in the first quarter of 2011 compared with the same period a year ago.

It’s not just margins, however, it’s also down to the spread. The difference in cost between WTI crude and Brent crude gives refiners with inland refineries a huge cost break compared with refiners along the US Gulf coast. The lead indicator on crude pricing is now Brent, not WTI.

Gulf coast refineries mostly pay Brent, or what are called waterborne, prices for crude while inland refineries pay WTI prices because there is no pipeline to carry the less expensive WTI from storage in Cushing to the Gulf Coast. Moving WTI crude to the coast by rail or truck is possible at the current spreads, but prices paid by the refiner are closer to Brent than WTI because of the increased transportation cost.

Here’s how Valero states it in their earnings report: “Combined with our heavy and sour crude oil processing capabilities, more than 80 percent of Valero’s refining capacity can process feedstocks that price below waterborne light-sweet crude oils.” And that’s what puts profits on the board for Valero and the others.

The refiners face two issues. First is volatility, where the Brent price could drop to significantly closer to the WTI price. Second, US drivers could stop buying gasoline.

The former is not likely to happen soon, but could be on the horizon for June. Investors have been playing the WTI/Brent spread by going long on Brent and short on WTI then following US economic data to move in and out of the spread bet.

Less driving happens slowly when it happens at all. While there is some evidence that drivers are staying off the road as prices climb to $4/barrel and more, it’s not happening in very great numbers yet.

Valero said that it expects a strong second quarter based mostly on the wide spread between WTI and Brent. The company also expects to boost its capacity utilization.

At market open this morning, Valero shares are down about -1%, to $28.83, within the 52-week range of $15.49-$31.12.

Paul Ausick

Filed under: Earnings, Oil & Gas Tagged: FTO, HES, HOC, MRO, TSO, VLO, WNR

Valero Looks To Get U.K. Refinery on the Cheap (CVX, VLO, HOC, FTO, RDS-A, BP)

Administrator — Thu, 10 Mar 2011 16:29:25 +0000

Almost a year ago, Chevron Corp. (NYSE: CVX) put out the word that it was looking to sell its Pembroke refinery in Wales. The offers didn’t exactly come pouring in. Refining is just too tough a business, too cyclical, to attract a lot of high-dollar offers. Unless, of course, an offer comes from an existing refiner that knows a good deal when one’s on offer.

It now appears that Chevron has a deal to sell Pembroke to Valero Energy Corp. (NYSE: VLO) for about $2 billion. Pembroke can process 210,000 barrels/day of heavy, sour crude — typically available at a substantial discount to the benchmark prices for light, sweet WTI or Brent.

If the Bloomberg report is accurate, and Valero does pay $2 billion for the refinery, the cost to Valero is about $9,500 per barrel of installed capacity. In the recent merger between Holly Corp. (NYSE: HOC) and Frontier Oil Corp. (NYSE: FTO), both much smaller than Valero, Holly is paying about $2.9 billion for Frontier’s 187,000 barrel/day capacity, or about $15,500 per barrel of installed capacity. Both prices include crude inventories on hand.

In another recent international refining deal, India’s Essar Energy agreed to pay $350 million for UK Stanlow refinery on offer from Royal Dutch Shell plc (NYSE: RDS-A). Stanlow’s nameplate capacity is 296,000 barrels/day, so the cost per installed barrel of capacity is just shy of $1,200. But Shell’s crude stocks are not included in the price. Add in an estimated $780 million worth of crude, and the cost per installed barrel climbs to about $3,800.

For comparison, when Valero bought Premcor in 2005, the deal was worth about $8 billion and the cost per barrel of installed capacity was about $9,500, which also included stocks of crude. BP plc (NYSE: BP) has put up for sale two US refineries with a total capacity of about 740,000 barrels/day with an asking price of about $4 billion, or $5,400 per installed barrel of refining capacity.

Without knowing the amount of crude in inventory at Pembroke, it’s hard to figure out exactly what Valero’s paying for the physical plant, but if the Stanlow deal is any guide, the physical plant amounts to about 30% of the total price paid, meaning Valero gets Pembroke for about $2,400 per installed barrel, not including the stocks on hand. It also gets its first European operation and a facility that can handle cheaper crudes. Building a new refinery would cost upwards of $12,000 per installed barrel.

This looks like a good deal for Valero, and it may turn out to be a great deal. Traders are skeptical, pushing the stock down by about -5% in morning trading, to $26.34, within the 52-week trading range of $15.49-$30.42.

Paul Ausick

Filed under: International Markets, Mergers and Buy Outs, Oil & Gas Tagged: BP, CVX, FTO, HOC, RDS-A, VLO

Refiners Getting Squeezed (VLO, HOC, FTO, TSO, MRO, XOM, CVX, COP)

247wallst — Mon, 07 Mar 2011 15:34:41 +0000

As crude oil prices continue their steady trend above $100/barrel, US refiners are preparing for the worst. Actually, the worst is already here, in the form of spiking prices. Worse than anything, refiners dislike volatility, and with crude prices rising $2/barrel or more every week, refiners’ worst nightmares are coming to life.

Pure-play refiners like Valero Energy Corp. (NYSE: VLO), Holly Corp. (NYSE: HOC), Frontier Oil Corp. (NYSE: FTO), and Tesoro Corp. (NYSE: TSO) get hit particularly hard. Integrated oil companies like Marathon Oil Corp. (NYSE: MRO), Exxon Mobil Corp. (NYSE: XOM), Chevron Corp. (NYSE: CVX), and ConocoPhillips Corp. (NYSE: COP) are able to offset losses in refining with higher prices for the crude they produce.

Since the beginning of the year, though, refiner’s have been doing very well. The crack spread, that is, the difference between what a refiner pays for crude and what that refiner is able to sell the refined products for, doubled between January 1st and March 1st, to more than $26/barrel. Here’s a chart for the past year from Bloomberg:

US demand for heating oil drove a lot of the gain. The rest came from more miles driven and, to some extent, short covering. Those traders who couldn’t believe that refiners could make a profit as crude prices rose had to keep doubling down. But payback time could be here.

Last week Valero indicated EPS for the first quarter would be in the range of $0.15-$0.30, far below estimates from analysts of $0.47. Valero said it expected an after tax loss of $0.61/share ($348 million) on forward sales. In other words, the company lost its hedging bets, and decided to close out its positions and take the loss in the first quarter.

Valero put up a new 52-week high in February, just as the unrest in Egypt was boiling up. Since then it has lost about 10%, although it has regained most of that loss. The stock owns a trailing P/E ratio of more than 50, but a forward P/E of less than 9. The company’s enterprise value is $20.31 billion.

Holly posted a new 52-week high at about the same time as Valero, and like Valero has seen a similar fluctuation since then. Holly has announced its intention to acquire Frontier in an all-stock deal that will give the combined company an estimated enterprise value of $7 billion. Holly’s trailing P/E ratio is nearly 30, and its forward P/E is just over 11. Frontier’s trailing P/E is about 77, and its forward P/E is 12.51.

Tesoro’s share performance tracks nearly identically with Valero’s and Holly’s. Tesoro’s enterprise value is $4.85 billion, but the company posted a loss last year, so there’s no trailing P/E. Forward P/E is near 11.

The majors — Exxon, Chevron, and Conoco — are looking to sell refining assets in an effort to cut debt and to put capital to work in exploration and production, where the real money is. Holly is getting Frontier at a discount, and Marathon has announced that it will spin-off its refining and marketing operations into a separate publicly traded company.

Refiners and refineries are being valued at their lowest level in more than four years. At the height of the “there’s-not-enough-US-refining-capacity” craze in 2006, refining assets were valued at 80% more than the same assets today.

The soaring crack spreads won’t continue, and as gasoline prices rise, US drivers will stay home more. The low valuations could soon be matched by lower refining margins and lower demand.

Paul Ausick

Filed under: General Tagged: COP, CVX, FTO, HOC, MRO, TSO, VLO, XOM

Top Analyst Upgrades & Downgrades (AMZN, BRK-A, BRK-B, CMCSA, FTO, POT, SVNT, STX, THC)

Administrator — Mon, 28 Feb 2011 13:15:02 +0000

These are some of the top analyst upgrades, downgrades, and initiations seen from Wall Street research calls this Monday morning.

Amazon.com Inc. (NASDAQ: AMZN) Cut to Neutral at UBS.
Berkshire Hathaway Inc. (NYSE: BRK-B) Raised to Hold at Stifel Nicolaus.
Comcast Corporation (NASDAQ: CMCSA) Started as Buy at Goldman Sachs.
Frontier Oil Corp. (NYSE: FTO) Raised to Equal-Weight at Barclays.
Potash Corp. of Saskatchewan (NYSE: POT) Raised to Buy at Gleacher & Co.; Maintained Outperform at Credit Suisse.
Savient Pharmaceuticals Inc. (NASDAQ: SVNT) Maintained Underperform at BofA/ML.
Seagate Technology PLC (NYSE: STX) Cut to Underweight at JPMorgan.
Tenet Healthcare Corporation (NYSE: THC) Raised to Buy at UBS.

You can 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

Filed under: Analyst Calls Tagged: AMZN, BRK-A, BRK-B, CMCSA, FTO, POT, STX, SVNT, THC

The 24/7 Wall St./Flame Index: Fannie And Freddie Losses

247wallst — Fri, 25 Feb 2011 14:48:16 +0000

Freddie Mac and Fannie Mae moved to the top of the negative news search as both lost billions of dollars. Frontier Oil remained high on the list due to concerns about its M&A plans. HealthSouth moved into the Top 10 after filing its 10-K.

The Flame Index started as a research tool in 2008 at the NY Innovation Design Lab (nyidlab). It was used as a general metric to evaluate companies and their risk in the media. Publicly traded Fortune 500 companies are used as a measure to calculate an overall market of negative news and the companies are ranked within that market.

Rank	Company	Ticker	Score	Change in Rank	Comments
1	Freddie Mac	FMCKJ	37.441	+37	Large quarterly losses
2	Fannie Mae	FNMAS	34.167	+8	Large quarterly losses
3	Frontier Oil	FTO	29.945	-2	Concern about Holly M&A. Shareholder lawsuits
4	Walt Disney	DIS	29.838	-1	New online video distribution hurts old media models
5	PNC Financial Services Group	PNC	29.45	+4	Concern about pressure from government to increase lending
6	Bank of America Corp.	BAC	29.227	+10	Concerns rise about mortgage settlement with Washington
7	HealthSouth	HLS	23.678	+681	Released 10-K causes concerns
8	Ford Motor	F	23.369	+82	GM profits show its competitive powers return
9	BP	BP	23.067	-2	Still dogged by worries about regulators and Gulf spill
10	NYSE Euronext	NYX	22.235	+7	Merger with Deutsche Borse may be troubled

Data and ranking provided by the Flame Index.

Filed under: General, Research Tagged: DIS, FMCKJ, FNMAS, FTO, PNC

The 24/7 Wall St./Flame Index: Frontier Oil Holders Revolt Against Merger

247wallst — Wed, 23 Feb 2011 14:47:09 +0000

Shareholders of Frontier Oil are displeased about its merger with Holly Corp. It would be more accurate to say that Holly is making an acquisition for $2.9 billion. Shareholder class actions suits have already started. Forest Laboratories was also hit by a wave of negative news as it said it would buy Clinical Data for $1.2 billion.

Note: The Flame Index scans thousands of news sites 24 hours per day and ranks companies getting the most negative press right now. The Flame Index Media Analysis Algorithm crunches the data for an up-to-the-minute ranking of the hardest-hit companies.
The Flame Index started as a research tool in 2008 at the NY Innovation Design Lab (nyidlab). It was used as a general metric to evaluate companies and their risk in the media. Publicly traded Fortune 500 companies are used as a measure to calculate an overall market of negative news and the companies are ranked within that market.

Rank	Company	Ticker	Score	Change in Rank	Comments
1	Frontier Oil	FTO	40.58	+659	Deal with Holly is swamped by angry shareholders
2	Borders Group	BGP	37.952	-1	Still suffering from the impact of Chapter 11 announcement
3	Google	GOOG	31.894	0	Worries mount over antitrust action in Europe. The next Microsoft?
4	Forest Laboratories	FRX	28.738	+272	Pressure on firm as it buys Clinical Data.
5	Best Buy	BBY	28.423	-3	Company management attacked because of closure of China stores and weak outlook in US
6	Family Dollar Stores	FDO	26.546	+7	Locked in struggle against Nelson Peltz buyout
7	Fannie Mae	FNMAS	26.353	-3	Government plan to dismantle mortgage firm looms
8	Allstate	ALL	25.348	+4	Concern about insurance company suit against Citigroup and Deutsche Bank for hiding losses on mortgage paper it was sold
9	Genzyme	GENZ	25.277	+18	Some shareholders believe Sanofi-Aventis buyout price was too low.
10	Walt Disney	DIS	25.176	+126	Netflix and Amazon plans to stream content may take leverage away from studios

Data and ranking provided by the Flame Index.

Filed under: General, Research Tagged: ALL, BBY, FDO, FRX, FTO, GOOG

Top Analyst Upgrades & Downgrades (AKAM, DHR, FLEX, FTO, GE, GOOG, HES, RNWK, RVBD, ROC, SVU, SYNA, UNH, VLO, WYNN)

Administrator — Fri, 21 Jan 2011 13:23:18 +0000

These are some of this Friday’s top analyst calls with upgrades, downgrades, and initiations seen from Wall Street research firms.

Akamai Technologies Inc. (NASDAQ: AKAM) Started as Neutral at Collins Stewart.
Danaher Corp. (NYSE: DHR) Cut to Hold at S&P Equity Research (late-Thursday call).
Flextronics International (NASDAQ: FLEX) Reiterated Outperform and raised target to $10 at Credit Suisse.
Frontier Oil Corp. (NYSE: FTO) Cut to Neutral at BofA/ML.
General Electric Co. (NYSE: GE) Reiterated Neutral and $21 target BofA/ML; Positive comments from Goldman Sachs.
Google Inc. (NASDAQ: GOOG) Raised target to $800 at Jefferies; Reiterated Outperform and raised target to $750 at Credit Suisse; Reiterated Buy and raised target to $750 at BofA/ML.
Hess Corporation (NYSE: HES) Cut to Neutral at BofA/ML.
RealNetworks Inc. (NASDAQ: RNWK) Raised to Hold at S&P Equity Research (late-Thursday call).
Riverbed Technology, Inc. (NASDAQ: RVBD) Started as Overweight at JPMorgan.
Rockwell Collins. Inc. (NYSE: ROC) Raised to Outperform and $85 target at Credit Suisse.
SUPERVALU Inc. (NYSE: SVU) listed as Bear of the Day and maintained Underperform at Zacks Equity Research.
Synaptics Inc. (NASDAQ: SYNA) Cut to Neutral at JPMorgan; Cut to Underperform at Needham.
UnitedHealth Group (NYSE: UNH) Reiterated Outperform and raised target to $50 at Credit Suisse.
Valero Energy Corporation (NYSE: VLO) Cut to Neutral at BofA/ML.
Wynn Resorts Ltd. (NASDAQ: WYNN) Raised to Outperform and listed as Bull of the Day at Zacks Equity Research.

JON C. OGG

Filed under: Analyst Calls Tagged: AKAM, DHR, FLEX, FTO, GE, GOOG, HES, RNWK, ROC, RVBD, SVU, SYNA, UNH, VLO, WYNN

Valero Leads Off for Refiners on Profits and Revenue (VLO, TSO, MRO, FTO, WNR, SNP, PTR)

Administrator — Tue, 26 Oct 2010 14:18:31 +0000

Valero Energy Corp. (NYSE:VLO) is the first of the oil refiners to report earnings this quarter, and this morning’s release is a lot better than a year ago, when diluted EPS soured to -$0.61. For the third quarter, Valero reported diluted EPS of $0.51 on revenue of $22.2 billion. Analysts had been expecting EPS of $0.48 on revenue of $20.67 billion. Other US refiners will report earnings next week. Tesoro Corp. (NYSE:TSO) is expected to post EPS of $0.46 on revenue of $4.74 billion, while Marathon Oil Corp. (NYSE:MRO) is being touted for EPS of $0.95 on revenue of $17.34 billion. Frontier Oil Corp. (NYSE:FTO) is expected to show EPS of $0.04 on revenue of $1.27 billion and Western Refining Inc. (NYSE:WNR) is expected to post EPS of $0.12 on revenue of $1.83 billion.

Valero’s refining throughput margins rose to $7.87/b, up from $5.08 in the same period a year ago. Of course a year ago Valero also paid about $8 less per barrel for crude than it did this year. The largest contribution to the higher earnings came from distillate production and sales, up from 708,000 b/d a year ago to 829,000 b/d this year. Distillate prices are around $5/b higher this year as well.

The company noted that it is on target to achieve $185 million cost reductions this year and plans to reduce costs by another $100 million in 2011. The big drop in expenses has come from a reduction in Valero’s asset impairment losses. For the first nine months of 2009, the company canceled $135 million in capital projects, compared with just $1 million in the first nine months of this year. Operationally, nothing much has changed, although G&A expenses are down $67 million for the nine months.

US companies aren’t the only refiners with good news today. The Chinese government’s economic planning agency has permitted the country’s refiners to increase their prices by about 4%. Both Sinopec (NYSE:SNP), officially China Petroleum & Chemical Corp., and Petrochina Co. Ltd. (NYSE:PTR) will benefit from this increase. The government is expected to issue a new pricing mechanism for refiners by the end of this year. Because Chinese refiners must buy oil on the open market, but sell refined products at a state-mandated price, the companies often have trouble showing profitability.

Valero’s earnings haven’t helped any refiner’s shares this morning. All US refiners are trading down slightly, while the two Chinese refiners are up slightly.

Paul Ausick

Filed under: Earnings, Oil & Gas Tagged: FTO, MRO, PTR, SNP, TSO, VLO, WNR

Top Analyst Upgrades & Downgrades (AMD, ACI, CTXS, EQIX, JDSU, NVDA, FTO, SO, SYMC)

Administrator — Thu, 29 Jul 2010 12:50:20 +0000

These are some of this Thursday’s top analyst upgrades, downgrades, and initiations seen in Wall Street research notes:

Advanced Micro Devices Inc. (NYSE: AMD) Cut to Market Perform at FBR.
Arch Coal Inc. (NYSE: ACI) Raised to Outperform at Macquarie.
Citrix Systems, Inc. (NASDAQ: CTXS) Raised to Outperform at Baird.
Equinix, Inc. (NASDAQ: EQIX) Raised to Outperform at Oppenheimer.
JDS Uniphase Corporation (NASDAQ: JDSU) Raised to Buy at S&P Equity Research (late Wednesday call).
NVIDIA Corp. (NASDAQ: NVDA) Cut to Market Perform at FBR.
Frontier Oil (NYSE: FTO) Cut to Neutral at Macquarie.
Southern Co. (NYSE: SO) Cut to Hold at Soleil.
Symantec Corporation (NASDAQ: SYMC) Cut to Market Perform at FBR; Cut to Market Perform at Morgan Keegan.

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

JON C. OGG

Filed under: Analyst Calls Tagged: ACI, AMD, CTXS, EQIX, FTO, JDSU, NVDA, SO, SYMC