For Immediate Release
Chicago, IL – January 12, 2018 – Zacks Equity Research highlights Chevron (CVX - Free Report) as the Bull of the Day and CenturyLink, Inc. (CTL - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Amazon (AMZN - Free Report) .
Here is a synopsis of all three stocks:
Bull of the Day:
Chevron, a Zacks Rank #1 (Strong Buy) is one of the world's leading integrated energy companies. Through its subsidiaries that conduct business worldwide, the company is involved in virtually every facet of the energy industry. Chevron explores for, produces and transports crude oil and natural gas; refines, markets and distributes transportation fuels and lubricants; manufactures and sells petrochemicals and additives; generates power; and develops and deploys technologies that enhance business value in every aspect of the company's operations.
Recent Earnings Data
In the company’s most recent earnings report, it beat both the top and bottom line expectations for the third consecutive quarter. Earnings improved by +51.5% YoY while revenues were up +20.1% YoY. The growth was driven by higher commodity prices (oil), and increased production volumes. Management commented that they were “ramping up” LNG projects in Australia, and that they have been successful with their ongoing cost cutting efforts.
The big driver behind CVX’s sustained upturn has been the price of oil. Oil recently broke $63 per barrel level for the first time in three and a half years. Further, recent news items have indicated that the price per barrel will continue to rise through 2018.
Early this week, the Energy Information Administration once again increased its price per barrel of oil expectations for 2018, after increasing its expectations December; West Texas Intermediate (WTI) up another +4.8%, and Brent crude was lifted another +4.3%. The EIA also anticipates that the U.S. will now produce 10.27 million barrels per day in 2018, up from the 10.1 million expectation in December. This is the highest estimate for annual production since the EIA started tracking production in 1983.
Also, President Trump’s recent tax plan included opening the ANWR Alaska area for exploration and drilling. This has a lot of potential for companies like Chevron, but the President didn’t stop at Alaska, he also expanded offshore drilling to almost all U.S. coastal waters. According to the report the Interior Department is proposing 47 auctions of drilling rights in the near future.
According to John Watson, Chairman and CEO, “We continue to see improvement in the underlying pattern of earnings and cash flow. Cash flow is at a positive inflection point, with oil and gas production increasing and capital spending falling. We’re completing projects that have been under construction and ramping up production, notably at our Gorgon LNG Project in Australia. And our shale and tight rock drilling activity in the Permian Basin is exceeding expectations. We expect this pattern to continue.”
Bear of the Day:
CenturyLink, Inc., a Zacks Rank #5 (Strong Sell) is a telecommunications company that provides broadband, voice and wireless services to consumers and businesses in the United States. It also offers entertainment services under the CenturyLink, Prism TV and DIRECTV brands. In addition, the company provides data, voice and managed services to business, government and wholesale customers in local, national and select international markets through its fiber optic network and multiple data centers. CenturyLink, Inc., formerly known as CenturyTel, Inc., is headquartered in Monroe, Louisiana.
Recent Earnings Data
In its most recent earnings report, the company missed both the Zacks consensus earnings and revenue estimates. Further, this was the fourth consecutive quarter that the company missed on the bottom line. Reported earnings were down -25% while revenues declined by -7.9%. Management commented that sales issues ahead of its merger close (Level 3 communications), and higher capex were the reasons for the disappointing earnings results. There is also a concern that management might have to cut its future dividends due to these issues.
According to Glen Post, CEO, “Although below our expectations, CenturyLink's third quarter 2017 high bandwidth services revenue increased more than five percent on a normalized basis year-over-year. This, together with Level 3's performance, reflects the continuing growth in demand for bandwidth and supports our belief that our increased scale and reach creates even greater potential for us to win in the marketplace. In addition, our commitment to enable market-leading customer experience and drive efficiencies into our business gives us great opportunity to grow adjusted EBITDA and free cash flow.”
You’ll Never Believe Amazon’s Share of the E-Commerce Market
Amazon has been considered the U.S. e-commerce king for years now, but the internet behemoth’s share of the domestic online shopping market soared to new highs in 2017, according to retail analytics firm One Click Retail.
Indeed, One Click’s newest latest estimates suggest that Amazon accounted for 44% of total U.S. e-commerce sales last year. That represents about $200 billion in e-commerce revenues, or about 4% of total U.S. retail sales. One Click estimates online sales through website indexing, machine learning, and in-house software.
One Click also estimated that consumer electronics was Amazon’s top-selling product category with $8.5 billion in revenues on the year. Electronics was followed by home & kitchen ($5.5 billion), publishing ($5 billion), and sports & outdoor ($4 billion). The company’s top-growing category was luxury beauty, which soared 47% year-over-year to hit $400 million in sales.
Amazon can point to several key factors for its remarkable growth, says One Click Retail. The firm notes that the company’s sophisticated marketing program has helped marketplace sellers boost sales, while its own private-label brands and products have also notched impressive growth.
One Click also mentioned that millennials, a marquee demographic for Amazon, are getting older and have more disposable income. Millennials are now 20 to 36 years-old, meaning that many of them are starting to buy homes and have children.
This gives Amazon a great opportunity to cash in on an audience that is already familiar with its platform. One Click said that millennials contributed “the bulk” of Amazon’s estimated $5.5 billion in home and kitchen sales, which witnessed a 20% year-over-year increase. The firm also said that millennials were the foundation of Amazon’s 33% growth in furniture sales.
The analytics firm also took a look at the effect of Amazon’s acquisition of Whole Foods on the company’s revenue picture. One Click said that sales of consumable products—like groceries, beauty items, and pet supplies—were already growing at a rate of 35% before the deal. That growth reportedly accelerated after the deal closed.
In the months that Whole Foods’ “365 Everyday Value” brand was available on Amazon.com, the label brought in about $10 million. Meanwhile, AmazonBasics generated about $400 million in sales over the course of the year, One Click estimates.
Amazon is currently a Zacks Rank #3 (Hold). The stock has gained about 57% over the past year.
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