MARKET CURRENTS
real-time news and commentary for investors
MARKET CURRENTS
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Today - Wednesday, June 19, 2013
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5:45 PM "I have become Mr. Linn Energy (LINE). I don't want to be. I happen to like the stock" Jim Cramer writes, citing the Berry Petroleum (BRY) merger: "It's an incredibly valuable property, much more than I think most people realize." Short-term traders should stay away, but for long-termers, the Berry deal - if it goes through - is a huge win for LINE shareholders. "If it doesn't, it will be because the bear raid worked." 3 Comments
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2:58 PM Cemex (CX +1.2%) has slipped 12% during the past month, and Barclays believes it’s time to buy the stock, not just because it's underperforming but fundamentals look good too, as EBITDA growth over the next four years driven by the recovering U.S. housing market. The firm also notes CX has been able to increase the amount of time it has to pay its debt while lowering the interest rates it owes. Comment!
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2:42 PM Aside from Linn Energy (LINE +6%) (earlier), SandRidge Energy (SD +3.2%) also enjoys a sustained rise from Lee Cooperman's CNBC comments. He thinks SD's assets are worth close to $10/share and expects management changes in the coming weeks. The full list of stocks Cooperman likes (video): TCRD, ESRX, HAL, RIG, QCOM, MSI, CIM, S, DISH, ARP. 1 Comment
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12:59 PM Sonoco Products (SON -1.4%) is downgraded to Neutral from Outperform with an amended price objective of $37 by Robert W. Baird, which says that while SON management is pursuing the right strategy of portfolio optimization and a bias toward share buybacks, YTD share outperformance has left the risk-reward ratio less compelling. Comment!
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12:35 PM "The Fed just has to remain friendly and I think they will," says Lee Cooperman, following Jeff Gundlach on CNBC. Business development firm THL Credit (TCRD) gets a boost after Cooperman mentions it as a company providing both growth and yield. Linn Energy (LINE): "We think the assets are worth more than $40." 4 Comments
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12:26 PM Richard Zeits sees a potential double or triple for Penn Virginia (PVA +1.3%) in the next 2-3 years, citing the market's failure to fully appreciate PVA's transformational Eagle Ford acquisition. PVA is "akin to an LBO situation," Zeits writes: quality assets with significant potential upside, a focused business plan, and in-place financing where "disciplined and effective operational execution may lead to substantial rewards." Comment!
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12:09 PM Calling long-dated U.S. Treasurys (TLT, TBT) the most hated asset class in the world (ed: They've been so for years), Jeff Gundlach - appearing on CNBC - calls them the one place where you can make money over the coming weeks. "There are no signs of inflation anywhere." 5 Comments
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11:31 AM Superior Energy (SPN +0.8%) is initiated with an Outperform rating and $34 target price at Cowen, which believes SPN stands to benefit from strategic entrances into international markets, growth in North American unconventional drilling activity, and strengthening activity in the deepwater Gulf of Mexico. Comment!
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11:09 AM ReneSola (SOL +4.9%) spikes higher after SA contributor Sneha Shah argues a low cost structure and diminishing competition in the solar wafer and polysilicon markets will allow the company to keep gaining share (it recently passed LDK to be the world's #2 wafer vendor), and that shares are due to rally after underperforming Chinese peers with stronger Japanese exposure. Shah also sees gross margin bottoming - it's expected to rise to 3%-5% in Q2 after coming in at -2% in Q1 - and predicts ReneSola will become a top-10 module supplier in 2013, with a 4%-5% share. 12% of the float was shorted as of May 31. Comment!
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10:16 AM Gevo (GEVO +6.2%) continues to rise on momentum from yesterday's news that it has resumed production of isobutanol at its Minnesota plant. But Raymond James downgrades shares to Market Perform, seeing production challenges ahead and positive margins unlikely to emerge before Q1 2014, with the next plant perhaps not coming online until beyond 2014. 1 Comment
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10:06 AM Century Aluminum (CENX -2.5%) is downgraded to Underperform from Neutral with a $9 price target at BAML, which says its newly lowered estimated 2013 LME price of $0.87/lb. vs. $0.93 offsets an eventual benefit from CENX's recently negotiated lower power costs. The firm also notes sentiment toward added aluminum capacity globally has soured. Comment!
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9:57 AM Diamondback Energy's (FANG +1%) target is raised to $42 from $35 at Wunderlich, whose increased confidence in the Wolfcamp B formation and FANG's potential in four other zones for the future cause it to raise its price target multiple to account for the increased value. Also, FANG says its stock offering priced at a 0.7% discount to Tuesday's close and was boosted to 6M shares. Comment!
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8:55 AM Linn Energy (LINE) and LinnCo (LNCO) are upgraded to Outperform at Howard Weil, which believes the Berry Petroleum (BRY) merger could be a great catalyst, providing improved organic targets and an oilier profile. While LINN's primary focus is closing the BRY deal, H2 could prove exciting with an improved organic growth program and the potential for additional large acquisitions. LINE +1.6% premarket. 12 Comments
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8:13 AM Cliffs Natural Resources (CLF) -1.8% premarket after shares are downgraded to Underperform from Neutral with a $16 price target (from $24) at BAML, which notes CLF's high cost of iron ore and met coal production. The firm thinks CLF will struggle to compete with new Australia capacity but sees no reason for a liquidity panic. 1 Comment
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Tuesday, June 18, 2013
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6:07 PM Red Hat (RHT +2.1%) rallied ahead of tomorrow's FQ1 report after SA Pro contributor/former hedge fund analyst Josh Burwick offered a bull case, and Piper made cautiously optimistic remarks. Burwick argues fears about the impact of Amazon Web Services on Red Hat are overblown, that slowing billings growth is offset by major growth in unbilled revenue, and that newly-announced OpenStack cloud infrastructure and app platform offerings should fare well. Piper says checks indicate FQ1 billings could be light, but adds Red Hat will make up for it in FQ2, and sees shares bottoming in the $40s. Comment!
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11:50 AM Newfield Exploration (NFX +3.6%) is upgraded to Buy from Hold with a $29 price target at Stifel Nicolaus, which cites an upcoming increased proved NAV from expected ~$1.15B in H2 international asset sales, upside to 2013 guidance (possibly with Q2 results), and delivery of growth showing up from its domestic core areas. Comment!
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11:35 AM KBR (KBR +1.6%) shares move higher following positive comments by Deutsche Bank, which notes the energy engineering services company's "significant advantage" given its ability to compete from a vertically integrated position in liquefied natural gas, and sees upside potential from new wins for its ammonia business. Comment!
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9:58 AM Premier Exhibitions (PRXI +11.8%) races higher, boosted by the announcement of a buyback authorization and SA Pro's nonpareil special situations aficionado Whopper Investments arguing the stock is trading well below a very conservative estimate of breakup value (article embargoed until tomorrow morning). Comment!
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8:58 AM Goldman Sachs removes Williams Cos. (WMB) from its Conviction Buy List and lowers its price target to $40 from $45, and cuts Williams Partners (WPZ) to Neutral from Buy with a $52 price target, down from $58. Goldman believes last week's explosion at the Geismar chemical plant adds material risk to near-term growth of both WMB and WPZ, putting dividend growth targets at risk. WMB -1.9% premarket. Comment!
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Monday, June 17, 2013
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6:59 PM Oracle (ORCL) has the potential to support a quarterly dividend at least twice as high as its current $0.06/share (0.7% yield), argues RBC's Matthew Hedberg. Hedberg points out Oracle, whose board will be free to consider a hike in August, only paid out 9% of its free cash flow in FY12, 1/3 of a peer group average of 27%. On the other hand, buybacks consumed 45% of free cash flow, a little above the peer group's 41%. Meanwhile, Jefferies' Ross MacMillan foresees Oracle reporting an in-line FQ4 on Thursday, with FQ3 order push-outs and a server refresh offsetting IT spending weakness. (Goldman) 2 Comments
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