Back to top

Analyst Blog

On Aug 21, Zacks Investment Research downgraded major integrated oil and gas company, Statoil ASA (STO - Analyst Report), to a Zacks Rank #4 (Sell).

Why the Downgrade?

On Jul 25, Norway-based Statoil reported second quarter 2013 adjusted earnings of 60 cents per ADR, lagging the Zacks Consensus Estimate of 65 cents. This was the company's second consecutive miss.

Results were dragged down by lower price realizations and weaker trading activity. Production volumes decreased 1% annually due to lower activity in the existing fields. Revenue also recorded a drop of 26% year over year.

Management is cautious about operational regularity and delays in other projects. Delay in the Norwegian field development and the company’s decision to postpone its investment decision on the Johan Castberg discovery also poses a concern.  

On the back of weaker gas prices and the asset swap deal with German oil and gas outfit Wintershall – which is expected to affect volumes by 2% – Statoil has lowered its production guidance for 2013.

A higher capex and the Norwegian state’s concentrated ownership in the company significantly reduces the liquidity and attractiveness of the stock compared to its European peers.

Based on several such factors, the Zacks Consensus Estimate for the third quarter has moved down 5 cents (or 8.5%) to 54 cents over the last 60 days. The Zacks Consensus Estimate for the full year is currently pegged at $2.59, after moving down 15 cents (or 5.5%) in the same time frame.

Stocks That Warrant a Look

We expect Statoil to perform below its peers and industry levels in the coming months and see little reason for investors to own the stock. However, one can look at Range Resources Corp. (RRC - Analyst Report), Magellan Midstream Partners LP (MMP - Analyst Report) and Dril-Quip, Inc. (DRQ - Analyst Report) as good buying opportunities. These stocks, sporting a Zacks Rank #1 (Strong Buy), offer tremendous value.
 

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%