Wednesday, April 16, 2014
- ConocoPhillips' (COP +1%) price target is raised to $85 from $80 at Oppenheimer to reflect the company's improving outlook on stronger financial and operating results (Briefing.com).
- Last week, COP reiterated its value proposition of 3%-5% compound annual growth for both production and margins, by allocating 95% of its $16B annual capex in 2014-17 on projects with greater than $30/boe margins while maintaining a dividend yield above its U.S. peers and strong financial flexibility.
- With higher production growth than other majors and a lower valuation than E&P peers, Oppenheimer says COP offers an alternative to both groups.
- Precision Drilling (PDS +5.3%) is upgraded to Overweight from Underweight at Morgan Stanley, which believes the oilfield services company may double its Canadian land-drilling business over several years, benefiting from its exposure to the liquefied natural gas market which should see meaningful secular growth.
- The firm says Canadian service providers Calfrac Well Services (CFWFF) and Trican Well Services (TOLWF) also could see growth for pressure pumpers.
- New Gold (NGD +3.1%) is upgraded to Buy from Hold at Canccord Genuity, despite lowering its price target to $7.50 from $8, seeing an attractive entry point after the recent share price correction which has more than priced in the development risk with the Blackwater and El Morro projects.
- A similar Canaccord upgrade for Golden Star Resources (GSS -2.3%) fails to provide the same support, as shares cap an 11.7% drop so far this week and a 23.5% swoon in the past month.
Tuesday, April 15, 2014
- Wal-Mart (WMT -0.8%) shares are lower, partly due to a William Blair downgrade to Underperform from Market Perform, mostly on concerns about the company's size which slows growth and dynamism, competition from online retailers, and the possibility that investors will rotate out of retailers in general at this stage of the economic cycle.
- Given the downgrade, the firm cuts its annual EPS estimates for this year and next by a dime each, to $5.15 and $5.50, and cites sluggish retail sales in Q1 and weak consumer confidence among low-income households, as many of them face the expiration of benefits from the federal SNAP program and higher healthcare costs.
- Basic Energy Services (BAS +3.8%) is upgraded to Hold from Sell with a $27 price target, up from $19, at Wunderlich, citing better market conditions while noting that much of the improvement is priced in.
- With weather improving from early 2014 and E&P budgets remaining robust, the firm believes most E&P companies are cramming 12 months of solid activity into 9-10 months, and the increase in spending should benefit players like BAS.
- The company's monthly update saw strong growth as the weather improved.
- Morgan Stanley (MS +0.7%) is upgraded to Buy from Neutral with a $35 price target at BofA/Merrill, based on a more attractive risk/reward given the recent pullback; earnings upside in wealth management, equities and investment banking; and long-term upside from increasing efficiencies and capital return.
- Jim Cramer thinks BAML's call "works" - he likes the job James Gorman has done and sees the call as especially helpful for MS ahead of Q1 earnings on Thursday.
Monday, April 14, 2014
- Early gains in Ballard Power (BLDP +0.7%) are fading, as Cowen starts coverage of BLDP at Market Perform with a price target of $3.75, slightly below the stock's close at $3.93 last week, as the firm notes some key positives.
- BLDP and Volkswagen have a multi-year contract which might be good for C$60M-C$110M in revenue, and a partnership with Anglo American Platinum targets developing home generators for South Africa.
- Cowen is looking for a FY 2014 loss of $0.07/share and a 2015 loss of $0.01/share, while seeing respective '14 and '15 revenue of $80M and $97.5M.
- After early gains, other alternative energy stocks are mixed: PLUG +1%, FCEL -0.8%, HYGS -3%, ZBB -1.1%.
- Transocean (RIG +3.3%) is upgraded to Hold from Sell with a $45 price target at Deutsche Bank, which says shares feel over-sold, particularly with near-term catalysts on the horizon.
- The firm sees some potential near-term catalysts with self-help initiatives and improved return to shareholders, including progress on an MLP, but the backdrop remains challenging as newbuild rates and the jackup market likely will roll lower later this year, which is likely to temper any enthusiasm.
- Meanwhile, shares are reiterated with a Hold rating at Argus, concerned that RIG is more exposed than peers to deteriorating conditions in the offshore drilling market (Briefing.com).
- Boardwalk Pipeline Partners (BWP +3.2%) is upgraded to Neutral from Underperform with a $16 price target, up from $14, at BofA/Merrill, as reports indicate BWP has concluded a successful binding open season in contracting some legacy south-to-north pipeline capacity to a north-to-south flow, which could help stabilize BWP's base business.
- BWP also may have several other potential pipeline reversals on the table, and recent natural gas spreads and volatility also may provide some near-term uplift for BWP's storage and pipeline businesses.
- The firm also upgrades Regency Energy Partners (RGP +0.4%), to Buy from Neutral with a $30 price target, believing units are overly discounting RGP's tight coverage and relatively expensive up-front multiples for recent acquisitions.
- Sempra Energy (SRE +0.4%) is initiated with a Buy rating and a $106 price target at UBS, which likes SRE's involvement in every attractive angle of energy infrastructure, with the bulk of growth tied to liquefied natural gas exports through its Cameron facility on the Gulf coast and Mexican energy reforms.
- The firm believes SRE's underlying core utility business in southern California also is well positioned to benefit from ever-expanding state energy policies, including storage, improved pipeline safety and hefty renewables ambitions.
- UBS thinks SRE can readily achieve a 10% EPS compound average growth rate through 2019, meaningfully above utility peers at ~4%.
- Energy Infrastructure analysts at J.P. Morgan make the case that with commodity prices soaring, its top-rated high-yielding MLPs in the category are a solid bet in a choppy market.
- NuStar Energy (NS) and Crestwood Midstream Partners (CMLP) pay distributions well in excess of 7%, Williams Partners (WPZ) and Regency Energy Partners (RGP) each pay ~7%, and Energy Transfer Partners (ETP) pays 6.8% after defying the recent market selloff to trade near 52-week highs.
- BP (BP +0.1%) shares aren't getting much of a lift from an upgrade at Canaccord, which raises its rating to Buy from Hold with a new $8.87 price target, up from $7.86, on its belief that the market is putting too much weight into the litigation surrounding the 2010 Deepwater Horizon oil spill.
- A compelling valuation argument is building in favor of BP based on free cash flow generation potential, the firm says; also, Macondo pre-tax cash flows have slowed dramatically in the last year, and with BP taking a tougher line in the U.S. courts, the cash out flows likely will remain at much reduced levels while BP fights its case.
Sunday, April 13, 2014
Saturday, April 12, 2014
- Market sell-offs make for a great time to pull out one's wish list for stocks and check for bargain prices. Post Holdings (POST) - run by master capital allocator Bill Stiritz - about doubled since being spun off from Ralcorp about two years ago, but is down 15% over the last month.
- It's not all about the broad equity slump - a stock offering and a cut in 2014 guidance have also taken a toll on the shares. Still, the capital raise gives plenty of deal-making ammo to someone who's proven he knows what to do with it. "The market opportunity for Post is large," writes Barron's David Englander, noting the highly fragmented active-nutrition and private-label foods industries, and that Stiritz has already stepped up acquisitions in these areas.
- Seventy-nine years old, Stiritz isn't getting any younger, but Englander reminds many on the Post bench and board have a long history of working with the CEO and rewarding shareholders, and - as Warren Buffett has shown - isn't 80 the new 70?
Friday, April 11, 2014
- "The best MLP you've never heard of" is Niska Gas Storage Partners (NKA +3.5%), according to a favorable profile by StreetAuthority's Daniel Cross, who says NKA stands out with a price-to-free cash flow ratio of ~14 while vs. a negative average for the industry, and a 9.6% dividend yield.
- This strength gives NKA the ability to make acquisitions and capital expenditures to grow at a much faster pace than other utility companies, Cross writes.
- Competitors such as Buckeye Partners (BPL) and TransCanada (TRP) also should also benefit from the rising tide in natural gas production since both companies trade at roughly NKA's P/E, but neither offers NKA's potential for double digit growth, according to Cross.
- The move toward integrated oilfield services offerings is a hot topic in the energy industry, and the large OFS companies - Schlumberger (SLB), Halliburton (HAL), Baker Hughes (BHI) - are positioning themselves as one-stop shops for energy E&P customers, Credit Suisse says, believing it has spotted the biggest beneficiaries of the trend.
- SLB is the most levered toward the trend but its integrated project management business is underappreciated by investors, the firm says; ~5% of SLB's workforce is dedicated to IPM, meaning the revenue contribution should be at least 5% and the contribution to margin even greater.
- Gulfport Energy (GPOR +0.3%) enjoys a round of analyst price target raises, as GPOR's ability to meet Q1 production guidance is seen as a positive given past guidance misses, and first production at Grizzly Oil Sands moves it closer to a potential capital event.
- Euro Pacific raises its target price to a Street-high $82 from $72, as the latest production data for wells in the wet gas performs in-line with GPOR's type-curve, and production rates from recent wells in the condensate window appear to be outperforming 1M-1.5M boe type-curve after the company switched from a gel frack to a slick-water frack (Briefing.com).
- Northland Capital lifts its target price to $80, and RBC moves its target to $72 from $62.
- Diamondback Energy's (FANG +5.1%) target price is raised to a Street-high $80 from $74 at Mizuho, which cites FANG's better than expected guidance in its operations update yesterday.
- The firm says FANG's well results continue to impress, particularly the Nail Ranch 2601H Wolfcamp B well in Martin County, which resembles some of FANG's best wells to date given its short lateral; FANG also continues to add acreage, picking up another 1,500 net acres in Martin County and 126 net mineral acres at the Spanish Trail lease (Briefing.com).
- Brean Capital also raises its target price, to $73 from $66.
- Seadrill (SDRL) -2.4% premarket after Credit Suisse downgrades shares to Neutral from Outperform and cuts its price target to $30 from $40.
- The firm believes SDRL misjudged the market with the amount of new rigs it built that have not been contracted, and that too much funding uncertainty exists amid a backdrop of high debt repayments and softening dayfloater rates.
Thursday, April 10, 2014
- CF Industries (CF -3.5%) is downgraded to Equal Weight from Overweight with a $267 price target at Barclays, mostly as a valuation call.
- The firm thinks the market gradually will price in CF's major volume expansions due in 2016, but looking ahead over the next several months, the environment will become more challenging for fertilizer stocks as the crop cycle turns and grain markets move toward a second year of supply growth.