CHICAGO, Sept. 21, 2011 /PRNewswire/ -- Zacks.com
announces the list of stocks featured in the Analyst Blog. Every
day the Zacks Equity Research analysts discuss the latest news and
events impacting stocks and the financial markets. Stocks recently
featured in the blog include: InterOil Corporation (NYSE:
IOC), CVR Energy (NYSE: CVI), Key Energy Services
(NYSE: KEG), Helix Energy Solutions Group (NYSE: HLX) and
Schlumberger (NYSE: SLB).
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Here are highlights from Tuesday's Analyst Blog:
Oil Stocks with Earnings Energy
Crude oil prices have held up relatively well since the summer
stock market correction began in July. The commodity almost seems
to be discounting a milder recession than equities have been, given
its singular sensitivity to a global economic slowdown.
Granted there have been new market supply dynamics at play with
Libyan oil fields off-line for what may be years. And with a
two-day Federal Reserve meeting in progress that may result in more
certainty about cheap dollar stimulus, higher oil prices may seem
"rigged" by monetary policy.
But beyond the short-term cyclical and political factors, the
long-term dynamics of energy markets -- particularly ideas about
"peak" oil and unstoppable rising demand from emerging economies --
will likely keep WTI crude a lot closer to $100 for the next year than $50.
So, while we wait for more evidence about the probable recession
in the US and the impact of Europe's debt crisis, its a good time to
assemble a buy list of strong energy names. Below are four
companies to consider; a refiner, an integrated E&P, and two
oilfield services companies.
InterOil Corporation (NYSE: IOC) is a $2.7 billion integrated energy company engaged in
the exploration, appraisal, and development of crude oil and
natural gas properties primarily in Papua
New Guinea. Based in Cairns, Australia, the company is also involved in the
distribution of various refined products under its branded name
InterOil Products Limited.
The earnings estimate trends for IOC paint of picture of
diverging expectations between this year and next. If those 2012
estimates are correct, then the stock is probably trading based on
that outlook, despite the dramatic increase in 2011 earnings.
But new research could set the table for substantial upward
revisions for 2012 estimates and that would make the stock likely
move higher from here. IOC actually spiked $3.50 higher in the last hour of trade Friday on
word that a Morgan Stanley analyst was raising estimates and his
price target to $135.
None of this is confirmed, and no actual estimate revisions are
yet reflected in the Zacks data. But it is worth noting that
several big houses like Raymond
James and BNP Paribas have targets north of $80 currently.
CVR Energy (NYSE: CVI) is a $2.3
billion independent refiner and marketer of high value
transportation fuels and, through a limited partnership called CVR
Partners (UAN), a producer of ammonia and urea ammonia nitrate
fertilizers.
CVR's earnings outlook has improved recently, with one of four
covering analysts pushing estimates to the positive growth side for
2012 and raising current year expectations from a 900%
increase.
Trading at under 7 times forward estimates, CVI offers nice
value in a small, aggressive growth company. Plus you get the
kicker of its majority stake in a profitable and rapidly growing
fertilizer company.
Key Energy Services (NYSE: KEG) is one of the largest
providers of onshore oil and gas well services in the United States and Argentina. In addition to it full range of
maintenance and workover services to major E&P firms, they also
provide services which include the completion of newly drilled
wells, the recompletion of existing wells and the plugging and
abandonment of wells at the end of their useful lives.
I have looked at KEG a few times this summer and watched its
share price go from $16 to
$20 and now back to $12. Given the fact its earnings momentum is
strong enough to earn it a Zacks #1 Rank, I find its growth very
attractive trading at 12.5 times forward estimates.
It's hard to argue with the earnings growth picture that
analysts see in this name. If they only earn $1.50 next year, at $12 the company is trading at only 8 times 2012
estimates. But let's look at one more cheap oilfield services name
to give you another choice.
Helix Energy Solutions Group (NYSE: HLX) is a leading
marine contractor and operator of offshore oil and gas properties
and production facilities. The company's unique integration of
marine contracting and oil and gas operations provides custom
solutions to producers and is designed to add stability to revenues
and earnings in an industry as cyclical as energy.
Helix and Key share some valuation metrics in addition being
oilfield service providers and this fact should inspire further
research into their business models and exposure to different
global markets. Both are about $1.75
billion in market cap and HLX is trading at 12.1 times F1
earnings.
Comparing these two companies and trying to pick the winner may
only offer a coin-flip's chance of success. But if you know your
investment goals and time frame, and you manage the risk, focusing
on solid small cap energy names is a long-term formula for
success.
Oilfield services is dominated by much bigger names like
Schlumberger (NYSE: SLB). And the industry is ranked 23 out
of 265 in the Zacks universe by virtue of its strong earnings
growth. The best strategy might be to pick a giant, and a small
fry.
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