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After the Fall: Value in Oil Stocks (XOM, CVX, BP, SLB, HAL, BHI, VLO, MPC, TSO, OIH, XOP)

Paul Ausick — Tue, 22 May 2012 15:11:04 +0000

The month-long slide in crude oil prices has chopped the share price of many of the biggest names in the oil patch. Exxon Mobil Corp. (NYSE: XOM) is about -4% in the past month, Chevron Corp. (NYSE: CVX) is down -2.8%, BP plc (NYSE: BP) is down more than -9%, Schlumberger Ltd. (NYSE: SLB) is down about -7%, and Halliburton Co. (NYSE: HAL) is down -6.5%. Only Baker Hughes Inc. (NYSE: BHI) shows a gain for the month, up about 3%. For the past three months, however, Baker Hughes is down more than any of the others, off about -20%.

Refiners are no better off: Valero Energy Corp. (NYSE: VLO) is down -7.7% in the past month, Marathon Petroleum Corp. (NYSE: MPC) is down about -9.8%, while Tesoro Corp. (NYSE: TSO) is up a bare 0.4%. Refiners have been surviving off the wide differential between WTI and Brent crudes and as the differential narrows, profits are harder to come by.

For the integrated oil companies, the price of crude has been the determining factor in a company’s profit picture: the higher the price, the bigger the profit. That makes sense. For the services company, higher prices typically mean more work as producers want to get more oil to sell.

Because crude prices are at a seven-month low now, we thought it would be interesting to look for value in some of the big oil stocks. After all, low crude prices mean share sell-offs, so there ought to be some value left on the table.

With the exceptions of Exxon and Chevron, all the companies we looked at have implied gains exceeding 30% if analysts have gotten target prices right. That’s some pretty good value, but we thought we’d try to handicap the race a bit more closely.

Exxon Mobil Corp. (NYSE: XOM) traded at $82.21 and has a market value of $383 billion. The consensus target price from Thomson Reuters is $94.53 and the 52-week range is $67.03 to $87.94. Exxon has a dividend yield of 2.8%. The implied upside to the consensus target is 15%, but we would note that the target is above the 52-week high.

Chevron Corp. (NYSE: CVX) traded at $99.71 and has a market value of $196 billion. The consensus target price from Thomson Reuters is $124.88 and the 52-week range is $86.68 to $112.28. Chevron has a dividend yield of 3.7%. The implied upside to the consensus target is 25%, but we would note again that the target is above the 52-week high.

BP plc (NYSE: BP) traded at $38.26 and has a market value of $121 billion. The consensus target price from Thomson Reuters is $53.25 and the 52-week range is $33.62 to $48.34. BP has a dividend yield of 5.2%. The implied upside to the consensus target is 39%, but we would note again that the target is above the 52-week high.

Schlumberger Ltd. (NYSE: SLB) traded at $67.47 and has a market value of $89 billion. The consensus target price from Thomson Reuters is $89.20 and the 52-week range is $54.79 to $95.53. Schlumberger has a dividend yield of 1.7%. The implied upside to the consensus target is 32%, and the target price is lower than the 52-week high.

Halliburton Co. (NYSE: HAL) traded at $31.40 and has a market value of about $29 billion. The consensus target price from Thomson Reuters is $47.28 and the 52-week range is $27.21 to $57.77. Halliburton has a dividend yield of 1.2%. The implied upside to the consensus target is 51%, and again the target price is lower than the 52-week high.

Baker Hughes Inc. (NYSE: BHI) traded at $42.20 and has a market value of about $18 billion. The consensus target price from Thomson Reuters is $56.33 and the 52-week range is $39.40 to $81.00. Baker Hughes has a dividend yield of 1.5%. The implied upside to the consensus target is 33%, and again the target price is well below the 52-week high.

Valero Energy Co. (NYSE: VLO) traded at $22.17 and has a market value of about $12 billion. The consensus target price from Thomson Reuters is $30.15 and the 52-week range is $16.40 to $28.68. Valero has a dividend yield of 2.8%. The implied upside to the consensus target is 36%, and again the target price is above the 52-week high.

Marathon Petroleum Corp. (NYSE: MPC) traded at $36.38 and has a market value of about $12 billion. The consensus target price from Thomson Reuters is $52.50 and the 52-week range is $26.35 to $47.43. Marathon has a dividend yield of 2.9%. The implied upside to the consensus target is 44%, and again the target price is above the 52-week high.

Tesoro Corp. (NYSE: TSO) traded at $23.49 and has a market value of about $3 billion. The consensus target price from Thomson Reuters is $31.36 and the 52-week range is $17.43 to $30.15. Tesoro does not pay a dividend. The implied upside to the consensus target is 34%, and again the target price is above the 52-week high.

For comparison, The SPDR S&P Oil & Gas Exploration and Production ETF (AMEX: XOP) traded at $50.45 in a 52-week range of $37.67 to $65.58. That’s about 30% below the 52-week high. The Market Vectors Oil Services ETF (AMEX: OIH) traded at $37.47 in a 52-week range of $35.32 to $45.14, again about 30% below the 52-week high.

Target prices for the large integrated oil companies are above 52-week highs, as are target prices for the refiners. Unless the price of crude rises sharply, the targets are out of reach for the integrated companies. For refiners, they’re whipsawed if prices for WTI open a bigger gap versus Brent or if WTI rise and Brent falls. No chance at those targets either way.

Targets for the services companies are lower than 52-week highs, which improves the chances of hitting those targets. Schlumberger, the largest of the services companies, and Baker Hughes both look appear to have the best chance to boost their share prices.

Paul Ausick

Filed under: Analyst Calls, Commodities, Oil & Gas, Trading Alert, Value Investing Tagged: BHI, BP, CVX, HAL, MPC, OIH, SLB, TSO, VLO, XOM, XOP

Oil Inventories & Capacity Act As Booster (OIH, VLO, PSX, USO)

Administrator — Wed, 16 May 2012 14:44:04 +0000

The U.S. Department of Energy has released its weekly oil inventory data showing a build up in crude inventories as expected. The rise came to +2.128 million barrels of crude oil to 381.64 million barrels, which is higher than the 1.4 million projected by Dow Jones and higher than the 1.5 to 2.0 million barrels we had been looking for.

Gasoline stocks drained as crude rose, with a drop of -2.797 million barrels to 204.3 million barrels. Dow Jones was expecting a drop of only 300,000 and we were only expecting a drop of 500,000 or a tad more.

Distillate stocks fell by 969,000 barrels down to 119.8 million barrels. Dow Jones was calling for a drop of only 200,000 barrels and we do not track estimates on this reading.

The big reading comes on the refining side as refineries ran at 88.3% capacity in the last week. This is up from 86.4% the prior week and well above the 86.7% expected from Dow Jones. We were hoping for 87% but any gains would have been welcome here if you are in the camp of ample supplies of gasoline and other finished products ahead of the key Memorial Day weekend surge in gasoline demand.

Market Vectors Oil Services ETF (AMEX: OIH) has risen into this news with a gain of 1.9% to $36.94 and this is off of nearly 52-week lows as the 52-week range is $35.80 to $45.14. That refining capacity should be a boost for Valero Energy Corporation (NYSE: VLO) with again of 3.4% at $22.25 and the newly-listed Phillips 66 (NYSE: PSX) with a gain of 1.4% at $32.12.

Even the United States Oil (AMEX: USO) is up 0.6% at $35.50.

JON C. OGG

Filed under: Commodities, Oil & Gas Tagged: OIH, PSX, USO, VLO

Valero May Sell Shuttered Aruba Refinery to China (VLO, PTR, DAL, HES, CHK)

Paul Ausick — Wed, 09 May 2012 19:17:32 +0000

In a filing yesterday with the Securities and Exchange Commission, oil refiner Valero Energy Corp. (NYSE: VLO) said that it has accepted an offer of $350 million plus working capital for its 235,000-barrel/day Aruba refinery. The filing does not specify the acquirer, but a report a Reuters names Petrochina Ltd. (NYSE: PTR) as the buyer.

The potential deal follows the acquisition of a Pennsylvania refinery by Delta Air Lines Inc. (NYSE: DAL). Two European oil trading houses, Gunvor and Vitol, have each acquired a European refinery recently from bankrupt Swiss firm Petroplus. Another large Caribbean refinery, Hovensa in the US Virgin Islands, is a joint venture between Hess Corp. (NYSE: HES) and Venezuela’s state-owned oil company PdVSA and will be shut down soon as well.

According to Reuters, the Aruba refinery would partially refine the heavy, sour crudes from Venezuela and ship the product to China where refining into usable products would be completed.

PetroChina is not likely to have any problem with acquiring the plant because it is not on US territory, but a possible acquisition of the Hovensa plant could trigger a review by federal Committee on Foreign Investment in the United States (CFIUS). The committee has in the past approved the sale of some energy assets in the US, for example by Chesapeake Energy Corp. (NYSE: CHK).

The possible sale by Valero has not boosted its share price today, which is currently down about -0.5% at $22.46 in a 52-week range of $16.40-$28.68.

Paul Ausick

Filed under: General Tagged: CHK, DAL, HES, PTR, VLO

As Crude Prices Fall, Are Refiners Going to Benefit? (HFC, WNR, VLO, TSO, MPC, PSX, SUN)

Paul Ausick — Mon, 07 May 2012 13:57:02 +0000

As of about 9:30 this morning, Brent crude is trading at its lowest price in three months, and the price differential between Brent and WTI crude closed to about $12/barrel last week before widening again to around $15/barrel this morning. The wider spread is due to the sharp decline in WTI, now trading under $98/barrel.

For refiners with significant production capacity in the middle part of the US, the price differential has made a major contribution to earnings. HollyFrontier Corp. (NYSE: HFC) this morning reported EPS that fell short of the consensus estimate, but at $1.16 were still well above the $0.79 EPS reported in the first quarter of 2011. Western Refining Inc. (NYSE: WNR) reported better-than-expected earnings last week, but Valero Energy Corp. (NYSE: VLO), Tesoro Corp. (NYSE: TSO), and Marathon Petroleum Corp. (NYSE: MPC) all came up short. ConocoPhillips has finally completed its spin-off of its refining assets into Phillips 66 (NYSE: PSX), and Sunoco Inc. (NYSE: SUN) is going to get out of the refining business one way or another by summer.

What matters for refiners is the cost of Brent. For those with operations along the Gulf and East Coasts, crude inputs come primarily from barrels priced at or near Brent prices. For mid-continent refiners like HollyFrontier and Tesoro, as the Brent-WTI differential closes, profits are very hard to come by.

If the price of WTI falls faster than the price of Brent, as has been happening, mid-continent refiners benefit. If Brent falls faster, the coastal refiners get more of the benefit because their input costs drop. As new or reversed pipelines become available to move WTI from the Cushing, Oklahoma, hub, Brent prices should drop further, adding to the benefit for coastal refineries.

No matter how one looks at it though, refining crude oil is not likely to produce big profits again any time soon, unless the US economy should jump its GDP growth above 3%. A slow, wobbly march in that direction won’t do much.

Shares in HollyFrontier are down about -1.6% in the first half-hour of trading this morning, at $29.05 in a 52-week range of $21.13-$38.90.

Paul Ausick

Filed under: Earnings, Economy, Oil & Gas Tagged: HFC, MPC, PSX, SUN, TSO, VLO, WNR

Major Reactions As Crude Marches Down Through $100/Barrel (USO, OIH, AMJ, XOM, CVX, SLB, BHI, RIG, NOV, VLO, CHK)

Administrator — Fri, 04 May 2012 16:24:08 +0000

It was just a couple of days ago that oil was trading around $105 per barrel for West Texas Intermediate crude. Now the talk has migrated away from geopolitical risks associated with Iran. European purchasing managers data this week and the expected outcome of the elections are only aiding to the notion that Europe is going to continue to lead the world down. Oil has marched through the $100 barrier to the downside so fast that you might think the price did not even matter. Perhaps the dismal nonfarm payrolls data was the final blow. Some of the downward move is being tied to confusion over new margin requirements set to take place, which is acting as an impact on the major market participants. We wanted to first take a look at the exchange-traded products and then at the key stocks in each group under the oil sector.

The United States Oil (AMEX: USO) is now down 4.1% at $37.23 and the Market Vectors Oil Services ETF (AMEX: OIH) is down 3.7% at $38.57. Even the JPMorgan Alerian MLP Index ETN (AMEX: AMJ), which is supposed to not be so tied to oil and gas prices, is down 0.75% at $39.43 against a 52-week high of $41.68.

Maybe dividend hikes are helping to mitigate some of the losses in the major integrated oil outfits. Exxon Mobil Corporation (NYSE: XOM) is down only 1.2% at $84.60 and Chevron Corporation (NYSE: CVX) is down about 2.1% at $103.75.

The drop is rather large in Schlumberger Limited (NYSE: SLB) with a loss of 3.7% at $69.95 for a loss of about $3 billion in market value. Baker Hughes Incorporated (NYSE: BHI) has suffered substantially from its highs by a drop of half from its 52-week high and shares are now down 4.4% at $40.97.

Elsewhere shares of Transocean Ltd. (NYSE: RIG) is down 4.4% at $48.08 (down from a high of over $70), while National Oilwell Varco, Inc. (NYSE: NOV) is down ‘only’ 2.2% at $71.12.

Valero Energy Corporation (NYSE: VLO) is even lower by 3.1% at $22.80 even though certain drops in the price of oil will help its operating margins. The caveat is that refiners need lower prices and actually they need stable prices so that they can have steadier pricing.

While its move to oil is marred by corporate problems tied to its CEO and governance issues, Chesapeake Energy Corporation (NYSE: CHK) is the only stock up on the major oil and gas stocks we follow.

This drop to $98 in crude is the lowest level since roughly February 10, 2012. This is setting up to be the worst week for crude since the end of September.

JON C. OGG

Filed under: Commodities, Economy, Oil & Gas, Trading Alert Tagged: AMJ, BHI, CHK, CVX, NOV, OIH, RIG, SLB, USO, VLO, XOM

24/7 Wall St. Closing Bell (WPI, AZN, ANF, SPWR, YGE, COST, MERU, ACI, VECO, PBY, ADM, CPO, AVP, DPZ, PFE, VLO, ABX, JDSU, MRO, FSLR, V, PFCB, DAL, CHK)

Paul Ausick — Tue, 01 May 2012 20:03:50 +0000

The major US stock indexes opened flat this morning but started to move higher following the better-than-expected ISM report on manufacturing (our coverage here). Construction spending in the US was a bit lower, but not enough to quell the enthusiasm over the manufacturing report. The US dollar index rose slightly today, now up 0.056% at 78.820. The GSCI commodity index is up fractionally at 684.88, with commodities mostly lower on the rising dollar. Cocoa put up a big gain today, while orange juice posted another sharp decline. WTI crude oil closed up 1.2% at $106.16/barrel, and Brent crude trades up 0.17% at $119.67/barrel. Gold settled up 0.1% today, at $1,662.40/ounce.

The unofficial closing bells put the DJIA up nearly 67 points to 13,280.31 (0.5%), the NASDAQ rose about 4 points (0.13%) to 3,050.44, and the S&P 500 rose 0.57% or nearly 8 points to 1,405.89.

There were several analyst upgrades and downgrades today, including Watson Pharmaceuticals Inc. (NYSE: WPI) reiterated as ‘buy’ at Canaccord Genuity; AstraZeneca PLC (NYSE: AZN) raised to ‘neutral’ at BofA; Abercrombie & Fitch Co. (NYSE: ANF) raised to ‘buy’ at UBS; SunPower Corp. (NASDAQ: SPWR) raised to ‘buy’ at Citigroup; Yingli Green Energy Holdings Co. Ltd. (NYSE: YGE) raised to ‘buy’ at Citigroup; Costco Wholesale Corp. (NASDAQ: COST) cut to ‘hold’ at Deutsche Bank; and Meru Networks Inc. (NASDAQ: MERU) cut to ‘neutral’ at RW Baird.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: Arch Coal Inc. (NYSE: ACI) is down -3.8% at $9.39 (more coverage here); Veeco Instruments Inc. (NASDAQ: VECO) is up 14.8% at $34.67 (more coverage here); Pep Boys – Manny, Moe & Jack (NYSE: PBY) is down -21.8% at $11.67 (more coverage here); Archer Daniels Midland Co. (NYSE: ADM) is up 7.9% at $33.25; Corn Products International Inc. (NYSE: CPO) is down -0.14% at $56.98; Avon Products Inc. (NYSE: AVP) is down -7.6% at $19.95; Domino’s Pizza Inc. (NYSE: DPZ) is down -9.6% at $34.18; Pfizer Inc. (NYSE: PFE) is down -0.14% at $22.87; and Valero Energy Corp. (NYSE: VLO) is up 0.9% at $24.92.

Tomorrow we get earnings from Barrick Gold Corp. (NYSE: ABX), JDS Uniphase Corp. (NASDAQ: JDSU), Marathon Oil Corp. (NYSE: MRO), First Solar Inc. (NASDAQ: FSLR), and Visa Inc. (NYSE: V).

Other standouts from today include the following stocks:

P.F. Chang’s China Bistro Inc. (NASDAQ: PFCB) is up 29.7% at $51.46. The company is being taken private in a deal worth $1.1 billion. More coverage here.

Delta Air Lines Inc. (NYSE: DAL) is up 0.8% at $11.05. The airlines bought an oil refinery from newly-public Phillips 66 (NYSE: PSX). More coverage here.

Chesapeake Energy Corp. (NYSE: CHK) is up 6.3% at $19.60. The company’s chairman will be replaced and the company reports earnings after markets close today. More coverage here.

Stay tuned for Wednesday. Fed Governor Daniel Tarullo and Richmond Fed President Jeffrey Lacker are giving speeches. We have noted the following events on the schedule (all times Eastern):

7:00 a.m. – Mortgage Bankers Association purchase applications
7:30 a.m. – Challenger job cut report
8:15 a.m. – ADP employment report
10:00 a.m. – Factory orders
10:30 a.m. – EIA weekly petroleum status report

Paul Ausick

Filed under: HI/LOW, Market Close Tagged: ABX, ACI, ADM, ANF, AVP, AZN, CHK, COST, CPO, DAL, DPZ, featured, FSLR, JDSU, MERU, MRO, PBY, PFCB, PFE, SPWR, V, VECO, VLO, WPI, YGE

24/7 Wall St. Closing Bell (TRP, DMD, ARII, CHK, KFT, DG, KALU, LDK, HUM, SNH, SOHU, ACI, ADM, RATE, BRCM, DPZ, ODP, PFE, SIRI, VLO, BKS, SUN, PAY)

Paul Ausick — Mon, 30 Apr 2012 20:13:01 +0000

The major US stock indexes opened slightly lower this morning and continued drifting lower all day. The Chicago PMI report got the day started on the wrong foot, showing a decline in spending even though personal income rose in March (our coverage here). Spain’s slip into recession did not help (our coverage here) and a report on global unemployment doesn’t offer much hope for economic expansion (our coverage here). The US dollar index rose slightly today, now up 0.05% at 78.780. The GSCI commodity index is up 0.35% at 684.45, with commodities mixed. Cocoa and orange juice posted sharp declines today. WTI crude oil closed down -0.1% at $104.87/barrel, and Brent crude trades down -0.24% at $119.54/barrel. Gold settled down less than -0.1% today, at $1,664.20/ounce, and an overall loss for the month of April of -0.5%.

The unofficial closing bells put the DJIA down nearly 15 points to 13,213.63 (-0.11%), the NASDAQ fell nearly 23 points (-0.74%) to 3,046.36, and the S&P 500 fell -0.39% or more than 5 points to 1,397.91.

There were several analyst upgrades and downgrades today, including Demand Media Inc. (NYSE: DMD) cut to ‘equal weight’ at Evercore; TransCanada Corp. (NYSE: TRP) cut to ‘hold’ at Desjardins; American Railcar Industries Inc. (NASDAQ: ARII) raised to ‘neutral’ at UBS; Chesapeake Energy Corp. (NYSE: CHK) raised to ‘outperform’ at BMO Capital; Kraft Foods Inc. (NYSE: KFT) raised to ‘overweight’ at JPMorgan; Dollar General Corp. (NYSE: DG) raised to ‘strong buy’ at Raymond James; and Kaiser Aluminum Corp. (NASDAQ: KALU) raised to ‘buy’ at Dahlman Rose.

Earnings reports since markets closed last Friday have led to some price changes as of the last half hour of trading today: LDK Solar Co. Ltd. (NYSE: LDK) is up 10.8% at $3.28 (our coverage here); Humana Inc. (NYSE: HUM) is down -8.4% at $80.49; Senior Housing Properties Trust (NYSE: SNH) is up 0.32% at $22.09; and Sohu.com Inc. (NASDAQ: SOHU) is down -7.4% at $51.62.

Tomorrow we get earnings from Arch Coal Inc. (NYSE: ACI), Archer Daniels Midland Co. (NYSE: ADM), Bankrate Inc. (NASDAQ: RATE), Broadcom Corp. (NASDAQ: BRCM), Chesapeake Energy Corp., Domino’s Pizza Inc. (NYSE: DPZ); Office Depot Inc. (NYSE: ODP); Pfizer Inc. (NYSE: PFE); Sirius XM Radio Inc. (NASDAQ: SIRI); and Valero Energy Corp. (NYSE: VLO).

Other standouts from today include the following stocks:

Barnes & Noble Inc. (NYSE: BKS) is up about 54% at $21.07 after posting a new 52-week high of $26.00 earlier today. The company has created a joint venture with Microsoft Corp. (NASDAQ: MSFT). More coverage here.

Sunoco Inc. (NYSE: SUN) is up 19.5% at $48.89 after posting a new 52-week high of $49.50 earlier today. The company is merging with Energy Transfer Partners L.P. in a deal worth about $5.3 billion. More coverage here.

VeriFone Systems Inc. (NYSE: PAY) is down -12.7% at $47.52. The company’s stock was downgraded at Deutsche Bank, along with comments that the company was inflating its organic growth estimates.

Stay tuned for Tuesday. Richmond Fed President Jeffrey Lacker, Minneapolis Fed President Naryana Kocherlakota, San Francisco Fed President John Williams, and Philadelphia Fed President Charles Plosser are all giving speeches. Motor vehicle sales are expected to be reported throughout the day. We have noted the following events on the schedule (all times Eastern):

10:00 a.m. – Institute for Supply Management manufacturing index
10:00 a.m. – Construction spending
11:30 a.m. – 4- and 52-week bill auctions

Paul Ausick

Filed under: HI/LOW, Market Close Tagged: ACI, ADM, ARII, BKS, BRCM, CHK, DG, DMD, DPZ, HUM, KALU, KFT, LDK, ODP, PAY, PFE, RATE, SIRI, SNH, SOHU, SUN, TRP, VLO

How Bad Are Things in the Garbage and Waste Management Sector? (WM, RSG, WCN, BIN, ECOL, VLO)

Administrator — Mon, 30 Apr 2012 12:01:36 +0000

The garbage and waste management sector is supposed to be a futurist’s delight. There are generally large barriers to entry for new players and most geographies are controlled by regional monopolies or controlled by only a few larger players. Making new landfills is also very unpopular, but everyone has to throw away garbage and waste and what cannot be used for recycling has to go into the existing landfill structures.

So, why are things so bad in the garbage and waste management sector? It is almost scary if you reviewed the earnings report from last week’s reports from Waste Management Inc. (NYSE: WM), Republic Services Inc. (NYSE: RSG) and Waste Connections Inc. (NYSE: WCN). Even Progressive Waste Solutions Ltd. (NYSE: BIN) had a bad report. In case you forgot, Bill Gates has been a huge investor in this sector with a 15% or higher stake in Republic Services Inc. (NYSE: RSG) via his personal investment entity called Cascade Investment.

Last week, particularly Friday, was just brutal on the shares of these companies due to such poor earnings from the waste management sector leaders. A contrarian take against the grain would be that this sector just got a lot cheaper for those investors who have a very long-term outlook. We want to see which companies are now a bargain and which ones may still deserve some caution.

Waste Management Inc. (NYSE: WM) took it on the chin last week as booked revenue of $3.30 billion and, while that was above the consensus of about $3.2 billion, the non-GAAP earnings of $0.38 EPS was shy of the $0.41 EPS estimate as GAAP earnings shrank by 5% from a year earlier. The company also reported a drop in the gross margin, operating margin and net margin. The $15-plus billion garbage company was down by more than 3% when the other reports were taken into consideration, with shares trading just above $34 and very close to the Thomson Reuters consensus price target of $34.40. This was just a $36 stock on Wednesday and the 52-week range is $27.75 to $39.69.

Republic Services Inc. (NYSE: RSG) reported weaker-than-expected first-quarter results as revenue increased 0.9% to $1.98 billion, but earnings per share fell by 7.8% to $0.38 EPS based on lower recycled commodity prices and higher fuel costs. The $10 billion waste company was said to have lost a large national account due to competitive pricing that will cost about $25 million in 2012 sales and it noted a loss of one or two municipal disposal contracts. The company is holding on to its pricing structure and it did manage to raise volume and said that they are seeing positive C&D activity and special waste volume. Republic was down over 11.5% at one point Friday morning at $27.50 and the 52-week range is $24.72 to $33.10.

Waste Connections Inc. (NYSE: WCN) turned in sales growth of more than 13% to $376 million, which was just above estimates, and it claimed increased pricing strength and that its C&D waste volume offset commodities and fuel prices. Still, its EBITDA margin was lower at 30.5% based on lower recycled commodity values and also on higher expenses due to its County Waste acquisition in 2011. The company’s franchise market model is allowing for pricing power and supposedly keeping customer churn lower. Waste Connection shares were down more than 1% on Friday again with shares above $32 and its 52-week range is $29.06 to $35.95. This was probably the only bright spot, but with a $3.5 billion market cap its stock trend was dictated by problems at the larger peers.

U.S. investors often forget about Progressive Waste Solutions Ltd. (NYSE: BIN) because it is based in Canada, but it has a $2.5 billion market cap. Keep in mind that this is the old BFI Canada, and it offers waste services in Canada and in the United States. A weak report from this company last week took a lot of wind out of its sails as well: $0.19 EPS versus $0.24 EPS expected, but revenues rose 3.6% to $438.3 million versus $434.3 million expected. The company reaffirmed its 2012 outlook. Shares were down more than 6% at $21.40 on Friday against a 52-week range of $18.35 to $25.56. The consensus target from Thomson Reuters is closer to $25 over the next year.

Gabelli issued a report on Friday calling a Waste Connection private market value of $31 for 2012 and $34 in 2013. What is interesting is that Thomson Reuters has a consensus target objective of just over $38 for the next 12 months. Gabelli also maintained its Buy stance on Republic Services and Thomson Reuters had a consensus target of $34.60 before considering the double-digit percentage drop on Friday morning.

Raymond James downgraded Republic Services to Market Perform from Outperform based upon the report. We would not be surprised at all if there are more analyst downgrades due to how the whole sector was soft. These reports from last week may set a sour tone for the smaller US Ecology Inc. (NASDAQ: ECOL) as it is set to report its first quarter earnings on Tuesday, May 1, 2012. Its market cap is only $390 million.

Based upon the new share price drops, the dividends of each are looking better: a 3.9% yield for Waste Management Inc. (NYSE: WM), a 2.8% yield for Republic Services Inc. (NYSE: RSG) but only 1.1% for Waste Connections Inc. (NYSE: WCN). Progressive Waste Solutions Ltd. (NYSE: BIN) now has a 2.5% dividend yield.

Things are bad enough in the sector that Enerkem Inc., a Canadian biofuel company backed by Waste Management Inc. (NYSE: WM) and Valero Energy Corporation (NYSE: VLO), even withdrew its registration statement with the SEC that would have allowed it to raise almost $140 million in an initial public offering. Enerkem develops refineries that convert trash into gases that get reprocessed to be turned into ethanol and other chemicals. The outfit cited market conditions in the filing. This is sector-specific market conditions, because, in case you had not noticed, the market has managed to hold up well in earnings season. These “market conditions” are also against the backdrop of what has been a super-premium IPO market.

It may take a bit for the dust to settle here because this was widespread disruption. That being said, we would start to look at a contrarian outlook now that the sector is on sale for those investors who invest with a multiyear horizon. Republic Services Inc. (NYSE: RSG) took it on the chin the worst of the lot, and it is not easy to bet against Bill Gates for too long in his post-software investments.

JON C. OGG

Filed under: Business Services, Earnings, Earnings Warning, Economy, Editor's Picks, Infrastructure, Utilities Tagged: BIN, ECOL, featured, RSG, VLO, WCN, WM

The Top Earnings Previews For The Week Ahead (NYX, ACI, ADM, BRCM, CHK, SIRI, VLO, AWK, NLY, CMCSA, FSLR, GRMN, HIG, MA, SYMC, V, WFM)

Administrator — Fri, 27 Apr 2012 16:01:24 +0000

Earnings season is in full swing and the coming week is going to be extremely active with big earnings reports. 24/7 Wall St. has tried to preview several top earnings for the week ahead.

NYSE Euronext, Inc. (NYSE: NYX) is on Monday and the following earnings reports are due on Tuesday: Arch Coal Inc. (NYSE: ACI); Archer Daniels Midland Co. (NYSE: ADM); Broadcom Corporation (NASDAQ: BRCM); Chesapeake Energy Corporation (NYSE: CHK); Sirius XM Radio Inc. (NASDAQ: SIRI); Valero Energy Corporation (NYSE: VLO).

Wednesday’s top earnings reports on deck are as follows: American Water Works Co. (NYSE: AWK); Annaly Capital Management Inc. (NYSE: NLY); Comcast Corporation (NASDAQ: CMCSA); First Solar Inc. (NASDAQ: FSLR); Garmin Ltd. (NASDAQ: GRMN); Hartford Financial Services Group Inc. (NYSE: HIG); MasterCard Inc. (NYSE: MA); Symantec Corporation (NASDAQ: SYMC); Visa Inc. (NYSE: V); and Whole Foods Market Inc. (NASDAQ: WFM).

We will provide previews for the larger report due on Thursday as the reports get closer. As a reminder, some of the dates and estimates may change and some of them may have already changed. Consensus estimates are from Thomson Reuters and we have provided color on each if applicable.

NYSE Euronext (NYSE: NYX) reports on Monday. The consensus estimates are $0.48 EPS and $611.1 million in revenues. Shares are around $27.00, and the consensus analyst price target is $32.30. Now that the German merger (the German takeover of America’s top exchange) is off the table, investors are focusing on the values here.

TUESDAY, May 1

Arch Coal Inc. (NYSE: ACI) is due Tuesday morning and its shares have been battered along with the entire coal sector. Estimates are $0.16 EPS and $1.12 billion in revenues. Shares are around $9.50, and the consensus analyst price target is $32.30.

Archer Daniels Midland Co. (NYSE: ADM) is due Tuesday morning and estimates are $0.59 EPS and $21.4 billion in revenues. Shares are around $31.00, and the consensus analyst price target is almost $34.00.

Broadcom Corporation (NASDAQ: BRCM) reports after the close on Tuesday and it has been riding the Apple wave. The consensus estimates are $0.55 EPS and $1.8 billion in revenues. Shares are around $36.30 and the consensus analyst price target is $42.40.

Filed under: Calendar, Earnings, The Week Tagged: ACI, ADM, AWK, BRCM, CHK, CMCSA, FSLR, GRMN, HIG, MA, NLY, NYX, SIRI, SYMC, V, VLO, WFM

24/7 Wall St. Closing Bell (AAPL, FSLR, VLO, TIF, C, CMA, GS, JNJ, MMR, GWW, YHOO, SYK, STX, URI, SRSL, ENOC, LEE)

Paul Ausick — Tue, 17 Apr 2012 20:07:31 +0000

Markets opened higher this morning and by late-morning equities were trading down about 1.5% across the board, where they have mostly remained for the rest of the day. An upbeat auction on short-term Spanish bonds and several positive earnings reports this morning led the market higher. China reported a sharp decline in foreign direct investment, but the impact on European and US markets was negligible. The US dollar index fell today, now down -0.11% at 79.467. The GSCI commodity index is down about -0.03% at 675.59, with most commodities gaining on the falling dollar. WTI crude oil closed up 1.2% at $104.20/barrel, and Brent crude trades down -0.06% at $118.61/barrel. Gold settled up 0.01% today, at $1,651.10/ounce.

The unofficial closing bells put the DJIA up more than 194 points to 13,115.54 (1.50%), the NASDAQ rose more than 54 points (1.82%) to 3,042.82, and the S&P 500 rose 1.55% or more than 21 points to 1,390.78.

There were several analyst upgrades and downgrades today, including Apple Inc. (NASDAQ: AAPL) started as a ‘strong buy’ with a target price of $800 at Raymond James; First Solar Inc. (NASDAQ: FSLR) cut to ‘hold’ at Goldman Sachs; Valero Energy Corp. (NYSE: VLO) reiterated as ‘outperform’ with a target price of $37 at Credit Suisse; Tiffany & Co. (NYSE: TIF) started as ‘neutral’ at Macquarie; and Citigroup Inc. (NYSE: C) reiterated as ‘outperform’ with a target price of $48 at Credit Suisse.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: Comerica Inc. (NYSE: CMA) is up 3.6% at $31.98; Goldman Sachs Group Inc. (NYSE: GS) is down about -1% at $116.59; Johnson & Johnson (NYSE: JNJ) is up 0.30% at $64.17; McMoRan Exploration Inc. (NYSE: MMR) is up 4% at $9.07; and W.W. Grainger Inc. (NYSE: GWW) is up 0.01% at $215.80;

After markets close today, we’ll hear from Yahoo! Inc. (NASDAQ: YHOO), Stryker Corp. (NYSE: SYK), Seagate Technology PLC (NASDAQ: STX), and United Rentals Inc. (NYSE: URI).

Other standouts from today include the following stocks:

SRS Labs Inc. (NASDAQ: SRSL) is up almost 37% at 9.38. The audio and voice technology company is being acquired by DTS for about $134 million.

EnerNOC Inc. (NASDAQ: ENOC) is up nearly 17% at $7.61. The smart metering company has a contract to provide natural gas metering services for 4,000 non-residential buildings in Brooklyn and Queens, New York.

Lee Enterprises Inc. (NYSE: LEE) is down -12% at $1.15. The newspaper publisher posted a wider loss in its second fiscal quarter.

Stay tuned for Wednesday. We have noted the following events on the schedule (all times Eastern):

7:00 a.m. – Mortgage Bankers’ Association purchase applications
10.30 a.m. – EIA weekly petroleum status report

Paul Ausick

Filed under: HI/LOW, Market Close Tagged: AAPL, C, CMA, ENOC, FSLR, GS, GWW, JNJ, LEE, MMR, SRSL, STX, SYK, TIF, URI, VLO, YHOO