Posted Mon May 20, 06:05 pm ET
by Zacks Equity Research
Analog Devices, Inc. (ADI) is set to report third quarter 2013 results on May 21. Last quarter, its results were in line with our expectations. Let’s see how things are shaping up for this announcement.
Growth Factors This Past Quarter
Analog Devices' second-quarter earnings were in line with the Zacks Consensus Estimate of 44 cents. Revenues were down 10.0% sequentially and at the lower end of the management guidance due to weak sales across a wide range of communications infrastructure applications, automotive and industrial segments. Margin expansion was limited due to the change in sales mix, which favored lower-margin products.
Analog Devices provided a modest outlook for the third quarter, with revenues forecast to increase 4–8% sequentially. ADI expects earnings per share in the range of 49–55 cents, in line with the Zacks Consensus Estimate of 52 cents at the midpoint.
The Zacks Consensus Estimate for the second quarter stands at 52 cents while that for fiscal 2013 stands at $2.18.
Analog Devices has beaten estimates twice in the last four quarters while meeting estimates in the other two. There were no estimate revisions for both the third quarter and fiscal 2013 over the past 30 days. As a result, the Zacks Consensus Estimate for both periods has remained unchanged.
The chances of a big surprise are unlikely given the lack of catalysts during the quarter. The stock carries a Zacks Rank #3 (Hold).
We caution against stocks with Zacks Rank #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Other stocks that have both a positive earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, #2 or #3 are:
Costco Wholesale Corp. (COST), Earnings ESP of +0.98% and Zacks Rank #2 (Buy).
Posted Mon May 20, 05:50 pm ET
by Zacks Equity Research
Cisco Systems Inc. (CSCO) announced that it’s ASR 5000 Series multimedia services platform has been selected by T-Mobile to manage T-Mobile’s mobile data traffic from its new long-term evolution (LTE) network and its 2G/3G networks in the Czech Republic.
Cisco’s ASR 5000 routing platform has the ability to optimize video transmissions while managing traffic efficiently. It is one unified platform that will help T-Mobile solve the complexities of the mobile network. The solution comes with predictive monitoring and a broader range of multimedia services and is expected to be implemented this year.
Thus, T-Mobile will benefit from Cisco’s expertise in network efficiency, which in turn will help itto enhance network speed and connectivity, reduce certain overhead costs and offer innovative services to its customers.
Cisco expects worldwide mobile data traffic to grow 13 times from 2012 to 2017 to a total annual volume of 134 exabytes in 2017, partly due to continued strong growth in the number of mobile Internet connections. Therefore, Internet speed will be a vital factor for the success of any telecom company.
The LTE technology is capable of delivering mobile Internet speeds that are up to 10 times faster than 3G connections, thus allowing customers to stream, download and upload games more efficiently. It has a quicker response and processing time as well.
It supports applications such as Internet Protocol (IP) telephony, mobile web access, gaming services, 3D television, high-definition (HD) mobile TV, video conferencing and cloud computing. It uses the spectrum more efficiently than other technology, creating more space for data traffic and services that can ultimately deliver a better network experience to users.
According to Strategy Analytics, LTE network connections may reach 322 million in 2013 and 1.6 billion by 2017. Further, another report by Juniper Research suggests that 4G LTE revenues may reach $100.0 billion by 2014 worldwide.
Thus, the rapid adoption of LTE technology worldwide owing to the increasing use of smart devices, is compelling network carriers to prioritize technology upgrades as slow Internet speed could increase customer churn. This might prove beneficial for Cisco, given its product portfolio and broad reach across geographies.
Cisco’s third-quarter fiscal 2013 revenues increased 5.2% year over year to $12.2 billion, driven by strength in data center and wireless businesses. Earnings of 48 cents were also higher than the Zacks Consensus Estimate on higher revenues and lower-than-expected operating expenses.
Posted Mon May 20, 05:33 pm ET
by Zacks Equity Research
Independent refiner Tesoro Corporation (TSO) announced that it has entered into a deal with its affiliate Tesoro Logistics LP (TLLP).
Per the contract, TLLP will buy part of the Carson-based logistic assets of Tesoro – which include six marketing and storage terminal facilities with 224,800 barrels per day of throughput capacity, as well as roughly 6.4 million barrels in total storage capacity. TLLP is expected to pay roughly $640 million for the acquisition, which includes $544 million of cash and the rest in equity.
The cash component is expected to be financed with the borrowings from the revolving credit agreement. The transaction is anticipated to be closed by the second quarter of 2013.
The expected yearly earnings before interest, taxes, depreciation and amortization (EBITDA) from the assets will be $60 to $65 million.
Moreover, TLLP believes that the residual portion of the property of Tesoro, which includes storage facilities, pipelines and marine terminals, will be offered to it for $450 to $550 million, within a year after the initial transaction gets closed.
San Antonio, Texas-based TLLP is a limited partnership, which purchases and possesses logistics properties of crude oil and refined products. The partnership also involves in the operation of the assets.
TLLP currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Two oil and gas production pipeline Master Limited Partnerships (MLP) like Kinder Morgan Management LLC (KMR) and Magellan Midstream Partners LP (MMP) are expected to outperform the broader U.S. equity market over the next one to three months. Both the firms retain a Zacks Rank #2 (Buy).
Posted Mon May 20, 05:20 pm ET
by Zacks Equity Research
Evergreen Helicopters, Inc. (“EHI”), a wholly owned subsidiary of Erickson Air-Crane Inc. (EAC), has purchased five aircrafts worth $10.1 million from a third party, which were earlier hired under lease. These aircrafts comprise of two Bell 214STs, two Beechcraft 1900Ds and one Casa 212-CC.
Post-purchase there was no change to the company’s fleet size. It remained at 85 aircrafts, which is a combination of 35 leased and 50 owned aircraft. Besides adding to the asset collateral base, the transaction would eliminate $3.0 million of annual lease expense and $12.2 million of total future lease obligations.
Recently, the company posted first quarter 2013 results with earnings and revenues above the Zacks Consensus Estimate. The top-line increase was driven by solid growth in Erickson’s infrastructure construction operation, mainly in the oil and gas sector.
As of Mar 31, 2013, Erickson had cash and cash equivalents of approximately $1.3 million. The company seems to be well utilizing its liquidity position. Recently, the company completed the acquisition of EHI from Evergreen International Aviation, Inc. The transaction payment comprises of $185 million cash, $17.5 million in unsecured promissory notes issued by Erickson Air-Crane and approximately four million convertible preferred shares of Erickson Air-Crane based on an agreed value of $11.85 per share worth $47.5 million. EHI operates a fleet of 65 aircraft of varying rotary-wing and fixed-wing types for a wide range of passenger transport and light, medium and heavy load-carrying missions. Moreover, EHI maintains a global presence with operations in North America, the Middle East, Africa, and Asia-Pacific.
Erickson is also set to acquire the Air Amazonia fleet and operations from HRT Oil & Gas. Besides adding to the product portfolio, these acquisitions will allow Erickson to emerge as a highly diversified, global company with opportunities to generate high-margin growth. The company presently retains a short-term Zacks Rank #1 (Strong Buy).
Other stocks that can also be taken into consideration are Northrop Grumman Corporation (NOC), Wesco Aircraft Holdings, Inc. (WAIR) and B/E Aerospace Inc. (BEAV), all with a Zacks Rank #2 (Buy).
Posted Mon May 20, 05:10 pm ET
by Zacks Equity Research
On May 17, 2013 shares of Anadarko Petroleum Corporation (APC) touched a new 52-week high of $90.46. The company’s high-quality exploration programs in the Gulf of Mexico (GoM) and West African prospects drove the stock to a new high. Anadarko recorded earnings surprises in the last four quarters with an average beat of 17.08%.
The company’s notable high-end programs in 2012 that primarily propelled earnings include the oil discoveries in Ghana and Cote d'Ivoire and natural gas discovery in Mozambique. This has helped in expanding the company’s reserve portfolio.
The joint venture agreements for the development of the Lucius project with an undisclosed party and the Salt Creek field project with Linn Energy, LLC were also significant highlights. Successful appraisals in the deepwater GoM and assets in Africa drove the healthy performance at Anadarko Petroleum last year.
The company’s onshore assets in the Wattenberg, Eagleford Shale, Greater Natural Buttes, and the Marcellus Shale basins logged in record production of 100,000 barrels of oil equivalent (BOE) per day at the end of 2012.
Anadarko Petroleum is continuing to tap the resource-rich GoM and African prospects through the first quarter of 2013. Year to date, the company has signed a 12.75% interest sell-off deal with an unnamed entity at its Heidelberg oil play which is expected to release first oil soon. The new Phobos oil discovery in the GoM will further spur returns, going forward.
Meanwhile, the company’s sound financial position backed by robust cash flows has aided Anadarko Petroleum to effectively execute its exploration activities.
The present valuation also makes the shares of Anadarko Petroleum attractive. The forward price/earnings (P/E) multiple of 21.9x is higher than the peer group average of 17.3x, reflecting a premium of 26.6%. In addition, Return on Equity ("ROE") of the company is 8.5%, higher than the peer group average of 8.0%.
Currently Anadarko Petroleum holds a Zacks Rank #3 (Hold). Oil and gas exploration stocks that are well-placed with a Zacks #1 include Abraxas Petroleum Corporation (AXAS), EPL Oil & Gas, Inc. (EPL) and Sandridge Mississippian Trust II (SDR).
Based in The Woodlands, Texas, Anadarko Petroleum Corporation engages in the exploration, development, production, and marketing of natural gas, crude oil, condensate, and natural gas liquids in the United States and internationally.
Posted Mon May 20, 05:00 pm ET
by Zacks Equity Research
On May 17, 2013 shares of Noble Energy Inc. (NBL) soared to a new 52-week high of $121.36. The company’s series of property sales and solid exploration ventures thrust the stock to a new high.
The key earnings drivers for Noble Energy were the Leviathan and Tamar prospect in the Eastern Mediterranean and Galapagos in the Gulf of Mexico (GoM). The 15-year long-term natural gas supply commitment to meet rising power demand in Israel proved to be a major turning point for Noble Energy.
Further, the company accrued a sizeable $1.15 billion from its Kansas, Dumbarton and Lochranza, Permian and Mid-Continent asset sales. This allowed Noble Energy the financial flexibility to invest in its growth-centric projects.
Other noteworthy steps that acted as a catalyst were the stake purchase in the Falkland Oil and Gas Limited’s licensed areas of around 10 million acres. Exploration companies like Noble Energy thrive on reserve accretion and escalating exploration options. At the end of 2012, Noble Energy discovered the Big Bend prospect in deepwater GoM.
Going forward, the company’s investments in the new venture exploration program will generate substantial returns.
The recent quarterly dividend increase of 12% to 28 cents per share from 25 cents came on the back of a favorable balance sheet position. This would certainly arrest investors’ confidence in the stock.
The present valuation makes the shares of Noble Energy look attractive. The forward price/earnings (P/E) multiple of 17.9x is lower than the industry average of 19.7x, reflecting a discount of 9.1%. In addition, Return on Equity ("ROE") of the company is 10.8%, higher than the peer group average of 7.1%.
Presently, Noble Energy carries a Zacks Rank #3 (Hold). However, other exploration operators with a Zacks Rank #1 are Abraxas Petroleum Corporation (AXAS), EPL Oil & Gas, Inc. (EPL) and Sandridge Mississippian Trust II (SDR). Based in Houston, Texas, Noble Energy operates internationally and engages in the acquisition, exploration, development, production, and marketing of crude oil, natural gas and natural gas liquids.
Posted Mon May 20, 04:45 pm ET
by Zacks Equity Research
Recently, ABB Ltd. (ABB) entered into a long-term Preventive Service agreement with China LNG Shipping International Co. Ltd. As per the terms of the agreement, ABB will provide maintenance services to all ABB equipment that are on board the vessels of LNG Shipping. The scope of the agreement includes maintenance of the power generation plant and the entire mechanical as well as electrical system on board.
Long-term service contracts help improve fleet reliability thereby saving lifecycle costs for a company. This is because such agreements facilitate optimized utilization of the vessel at the lowest maintenance cost possible. The current agreement is for six vessels owned by the Chinese shipping company over the next five years. The contract is effective from Jan 1, 2013.
As per the terms of the agreement, ABB will not only provide complete annual site survey and on-call services for the six vessels but will also provide the shipping company with dry dock service once in two and a half years. Dry docking of vessels is a very important aspect of sea fleet maintenance for shipping companies. Shipping companies during the off-season send their fleet out of operation for complete maintenance and overhauling. Dry docking ensures maximum non-stop services during the on-season.
ABB is a leader in power and automation technologies that enable utility and industry customers to improve performance while lowering the environmental impact. The growing global investment in power distribution, both in mature and the emerging markets, is expected to drive momentum for ABB, going forward. Recently, the company has been making strategic acquisitions to further strengthen its position in various emerging areas of the power industry. In the last reported quarter (1Q13), Power Systems revenue was $2.0 billion, up 15% in terms of local currency.
ABB currently has a Zacks Rank #3 (Hold). However, some other companies operating in the same industry and worth considering at the moment are Quanta Services Inc. (PWR), Willdan Group Inc. (WLDN) and Harris & Harris Group Inc. (TINY), all having a Zacks Rank #2 (Buy).
Posted Mon May 20, 04:30 pm ET
by Zacks Equity Research
Recently, Fluor Corporation (FLR) received a contract from Qatar’s Public Works’ Authority for program management and construction supervision services for the Sharq Crossing. The contract is valued at $185 million and will be booked in Fluor’s second quarter order book under the Industrial & Infrastructure segment. The contract is expected to complete by 2020.
Sharq Crossing is one of the important infrastructure development plans for Qatar before the 2022 FIFA World Cup. This will be an important link across the Doha Bay to support the run-up for the World Cup event. The project will primarily comprise bridge sections which will be interconnected with an immersed tube tunnel that will create a new passageway underwater across the Doha Bay. The total cost of the Sharq Crossing program is $5 billion.
Fluor Corporation has a strong presence and brand name in the Middle East, especially in Qatar. Prior to this, Fluor received a FEED (Front-End Engineering and Design) contract jointly from Qatar Petroleum and Royal Dutch Shell plc (RDS-A) for the Al-Karaana Petrochemicals Complex in Ras Laffan Industrial City, Qatar. Fluor will book the contract into the backlog for the first quarter of 2013. However, the contract value is not disclosed.
In the last reported quarter (1Q13) revenues in the Industrial & Infrastructure segment came in at $3.1 billion versus $3.0 billion a year ago. The marginal improvement was driven by increased contributions from the infrastructure business line. New awards for the segment totaled $2.2 billion in the first quarter, primarily driven by large infrastructure programs, including the Tappan Zee Bridge in New York and the Horseshoe road project in Texas. Backlog at the end of the quarter was $16.0 billion versus $23.3 billion a year ago, mainly due to reduced mining and metals awards over the past year.
Fluor currently has a Zacks Rank #3 (Hold). However, some other companies in the same sector that are worth considering at the moment are Chicago Bridge & Iron (CBI), Quanta Services Inc. (PWR) and Orion Marine Group Inc. (ORN), all having Zacks Rank #2 (Buy).
Posted Mon May 20, 04:20 pm ET
by Zacks Equity Research
The U.S. District Judge Jed Rakoff has revoked his earlier order to dismiss a major portion of the lawsuit filed by Brussels based Dexia N.V./S.A against JPMorgan Chase & Co. (JPM). The lawsuit accused JPMorgan of deliberately selling risky mortgage-backed securities (MBS) worth $1.6 billion to Dexia during the housing boom prior to the 2008 financial meltdown.
In justifying the revival of the lawsuit, Rakoff stated that he lacked any jurisdiction under the Edge Act to dismiss the case. Further, citing the ruling of 2nd U.S. Circuit Court of Appeals in New York for American International Group, Inc.’s (AIG) lawsuit against Bank of America Corporation (BAC), Rakoff decided to reverse his decision for the above-mentioned lawsuit.
Now, the trial will resurface in the New York state court, where it began in Jan 2012, when Dexia sued JPMorgan along with its affiliates – The Bear Stearns Companies, Inc and Washington Mutual, Inc. According to the subsidiary of Dexia – FSA Asset Management LLC – the accused clearly knew of the risks associated with the mortgage securities. However, JPMorgan allegedly sold massive quantities of these securities to Dexia to reduce its own exposure.
The Dexia lawsuit attracted media attention after a series of emails were discovered suggesting JPMorgan’s sale of massive quantities of these securities, while being aware of the associated risks.
In Apr 2013, Rakoff had allowed Dexia to proceed with only 5 claims, while dismissing nearly 60 claims. This significantly slashed the potential legal settlement to $5.7 million from $774 million.
Apart from JPMorgan, other banks including BofA and Morgan Stanley (MS) continue to face lawsuits concerning the sale of MBS prior to the economic crisis. In addition, JPMorgan faces a number of other lawsuits alleging legal malfeasance.
Over the last couple of years, JPMorgan has been doling out millions to settle litigations. However, the company’s strong fundamentals continue to act as a catalyst.
JPMorgan currently carries a Zacks Rank #2 (Buy).
Posted Mon May 20, 04:10 pm ET
by Zacks Equity Research
A unit of Kinder Morgan Energy Partners, L.P. (KMP), Tennessee Gas Pipeline Company, L.L.C., has inked a binding 20-year firm transportation standard agreement with Japan’s Mitsubishi Corporation.
Per the agreement, Mitsubishi will transport 600,000 dekatherms per day of natural gas designated for the planned Cameron LNG liquefaction facility in Hackberry, La. The facility is scheduled to commence LNG exports in the second half of 2017.
Mitsubishi will act as the foundation shipper for Tennessee’s Southwest Louisiana Supply Project, which is intended to offer shipping from various supply basins in Ohio, Pennsylvania, Texas and Louisiana to Cameron Interstate Pipeline that connects directly to the Cameron LNG Terminal.
Kinder Morgan is not the owner of Cameron Interstate Pipeline or the Cameron LNG facility. The Southwest Louisiana Supply Project is planned to provide transportation to the booming southwest Louisiana market. The project comprises further interconnections with shale supply, new pipeline laterals and augmentation to Tennessee’s existing pipeline system to facilitate bi-directional flow to the region. Tennessee is likely to carry out a binding open season for additional interest in its project at a later date.
The Tennessee partnership with Mitsubishi will assist the former in expanding its foothold as well as connecting the conventional and shale supply areas from the South Texas Eagle Ford to the Utica and Marcellus in Ohio and Pennsylvania. It will also improve access to the Haynesville shale supply area and the Perryville Hub in Louisiana, making the Southwest Louisiana Supply Project suitable for the latest Mitsubishi-Kinder Morgan tie up for the Cameron LNG facility.
Kinder Morgan carries a Zacks Rank #3 (short-term Hold rating). However, there are other stocks in the oil and gas industry like Dawson Geophysical Company (DWSN), InterOil Corporation (IOC) and Exterran Holdings, Inc. (EXH) that appear more attractive in the short term. All three stocks carry a Zacks Rank #1 (Strong Buy).
- Analog Devices Preview: Will It Miss?
- Mon May 20, 06:05 pm ET
- Cisco ASR 5000 Series for T-Mobile
- Mon May 20, 05:50 pm ET
- TLLP and Tesoro Ink a Deal
- Mon May 20, 05:33 pm ET
- Erickson Purchases Five Aircrafts
- Mon May 20, 05:20 pm ET
- Anadarko Reaches 52-Week High
- Mon May 20, 05:10 pm ET
- Noble Energy Hits 52-Week High
- Mon May 20, 05:00 pm ET
- ABB: Long-Term Contract with LNG Shipping
- Mon May 20, 04:45 pm ET
- Fluor Gets Qatar PWA Contract
- Mon May 20, 04:30 pm ET
- JPMorgan to Face Dexia Lawsuit Again
- Mon May 20, 04:20 pm ET
- Kinder Unit and Mitsubishi Team Up
- Mon May 20, 04:10 pm ET
The content contained in this weblog feature may have been abstracted from a complete Zacks Equity Research report.