Today's Must Read
E-commerce Sales to Fuel Walmart (WMT), Soft Margins a Woe
ConocoPhillips (COP) Banks on Oil-Rich Eagle Ford Acreage
Tuesday, September 17, 2019
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including Chevron (CVX), Walmart (WMT) and ConocoPhillips (COP). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Chevron’s shares have outperformed the Zacks Integrated Oil industry over the past three months (0.9% vs. -5.1%). The Zacks analyst thinks that the company’s existing project pipeline is among the best in the industry, targeting volume growth of around 4-7% in 2019 thanks to planned expansion in the Permian Basin.
Chevron pumped 55% more out of the West Texas shale play in the most recent quarter compared with the year-ago period, with output set to soar in the coming years. Being one of the most oil weighted majors, Chevron is also poised to benefit from the recent Saudi Arabian supply shock and the subsequent advancement of crude oil.
However, there are worries over drop in its refining earnings that once again cut into gains from rising E&P income. The massive capex might also play a spoilsport.
Shares of Walmart have gained 16% in the past six months, outperforming the Zacks Supermarkets industry’s rise of 14.2%. The Zacks analyst believes that the company’s focus on strengthening e-commerce and store operations aided it retain sturdy comps trend in first-quarter fiscal 2019, wherein earnings marked its fifth straight beat.
Further, U.S. comps rose for the 19th straight time. Further, e-commerce sales surged on robust Walmart.com and online grocery performances. Encouragingly, e-commerce sales are expected to rise nearly 35% in fiscal 2020. The company is also making efforts to improve its International unit by shifting focus to profitable countries.
However, the addition of Flipkart was a drag on Walmart’s operating income. Moreover, transportation costs, compelling pricing strategy and tariff-related worries are threats to margins. Nonetheless, the Flipkart deal bodes well for the long term.
ConocoPhillips’ shares have gained 0.3% year to date, outperforming the Zacks U.S. Integrated Oil industry’s fall of 11% over the same period. ConocoPhillips holds the bulk of acres in the unconventional plays of Eagle Ford shale, Delaware basin and Bakken shale.
From the three oil-rich plays, ConocoPhillips projects compound annual production growth rate of more than 25% from 2017 to 2019. The Zacks analyst believes that there are significant opportunities for ConocoPhillips in the Eagle Ford shale where it owns about 3,400 undrilled locations that could lend access to almost 2.3 billion barrels of oil equivalent estimated potential reserves.
However, ConocoPhillips’ expectation of higher production costs is likely to hurt profits. Moreover, the company’s third-quarter output is expected to be hurt by turnaround activities in Alaska, Asia Pacific and Europe. On top of that, over the past two years, the upstream energy player has been persistently paying lower dividend yield than the industry.
Other noteworthy reports we are featuring today include TransDigm Group (TDG), TELUS (TU) and Phillips 66 Partners (PSXP).
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Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>