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XOM | House panel subpoenas New York Massachusetts attorneys general | By Valerie Volcovici WASHINGTON Reuters A U S House of Representatives panel on Wednesday issued subpoenas to the attorneys general of New York and Massachusetts to force them to submit information on their investigations into whether Exxon Mobil NYSE XOM misled investors on climate change risks accusing the attorneys general of having a political agenda The House Committee on Science Space and Technology also subpoenaed eight environmental and legal groups The attorneys general have appointed themselves to decide what is valid and what is invalid regarding climate change committee Chair Lamar Smith a Republican of Texas said He said the attorneys general are pursuing a political agenda at the expense of scientists right to free speech The panel has demanded that state attorneys general hand over any records of consultations the prosecutors had with outside environmental groups before their probes were opened New York and Massachusetts top lawyers lead a coalition of 17 state attorneys general who have said they would investigate Exxon and whether its executives misled the public by contradicting research from company scientists that spelled out the threats of global warming Smith and Republican members of the House panel have accused the coalition s members of stifling free speech and scientific inquiry by those who do not believe in manmade climate change I don t know what we will find Smith told reporters We might find an intent to intimidate So far New York and Massachusetts have issued subpoenas against Exxon Mobil one of the world s largest publicly traded companies The House committee twice demanded that the state attorneys general hand over all records of communications between their offices and outside groups about Exxon inquiries Darin LaHood a Republican of Illinois on the panel said on Wednesday that the probe by the attorneys general prohibits free speech in a way you would see in a third world country Cyndi Roy Gonzalez the spokeswoman for the Massachusetts attorney general s office said in a statement that Smith s committee has no right to interfere with a state inquiry into whether a private company violated state laws and we will continue to fight any and all efforts to stop our investigation Green groups Greenpeace and 350 org made similar criticisms in a letter to Smith Exxon which has said that it has acknowledged the reality of climate change for years called the subpoena unreasonably burdensome and intrusive It also raised questioned about jurisdiction The attorneys general and the groups have two weeks to respond |
XOM | ExxonMobil launches bidding war for InterOil in PNG gas push | MELBOURNE Reuters ExxonMobil NYSE XOM Corp has made a bid worth at least 2 2 billion for InterOil Corp and its stake in a rich Papua New Guinea gasfield winning the support of its target and topping an offer from Australia s Oil Search Ltd The bid pits ExxonMobil the world s biggest oil company against Total SA PA TOTF which is backing Oil Search as the French giant looks to push forward with its planned Papua LNG project to rival ExxonMobil s existing PNG LNG project Oil Search which owns a stake in both projects bid for InterOil in the hopes of tying the two LNG projects together to help cut costs and speed up development of the new gas field ExxonMobil s move could still achieve similar ends PNG is considered one of the best locations for LNG projects because of its high quality gas low costs and proximity to Asia s big LNG consumers If Oil Search wins InterOil Total has agreed to buy part of InterOil s stake in the Elk Antelope gas field which would give it a 48 percent stake in the field that will feed its planned project Elk Antelope gas could also be used at least initially to feed ExxonMobil s PNG LNG project Drilling of one more well this year could prove the field holds much more than the at least 6 2 trillion cubic feed tcf of gas under current estimates Oil Search has at least until July 21 to submit a revised offer and said it was talking to Total about making a higher bid Total was not immediately available for comment Analysts said Oil Search s dream of getting Total and ExxonMobil to work together could still be fulfilled even if it walks away from the bid for InterOil handing it to ExxonMobil This is obviously very positive for Interoil shareholders but it s positive for Oil Search shareholders too because through Exxon coming in they get the benefit of the alignment of projects without the share dilution in the near term said Bernstein analyst Neil Beveridge ExxonMobil has offered 45 worth of its own shares for each InterOil share plus a payment of 7 07 per share for each trillion cubic feet equivalent tcfe for resources of more than 6 2 tcfe at the Elk Antelope gas field up to a maximum of 10 tcfe InterOil said ExxonMobil has submitted an offer to acquire InterOil Corporation which we believe represents a superior proposal ExxonMobil said in an emailed statement Oil Search offered of 8 05 of its own shares for every InterOil share valuing InterOil s shares at 42 66 on Friday s close plus 0 77 per million cubic feet cfe for resources of more than 6 2 tcfe at Elk Antelope The 2 2 billion valuation is based on New York listed InterOil s 49 9 million common shares issued and outstanding InterOil s shares last traded at 47 61 Oil Search shares rose 2 7 percent |
XOM | Total seen unlikely to fight ExxonMobil over South Pacific gas | By Sonali Paul MELBOURNE Reuters Total SA PA TOTF is unlikely to challenge ExxonMobil N XOM in a bidding war for explorer InterOil Corp N IOC the French firm s partner in a gas field in Papua New Guinea analysts said on Wednesday ExxonMobil this week topped an offer from Oil Search which was backed by Total Oil Search is due to declare on Thursday whether or not it will match ExxonMobil s 2 2 billion bid Total said in a statement that it was analyzing ExxonMobil s competing offer ExxonMobil and Total both want to simplify the ownership of the Elk Antelope gas field by taking out InterOil s 36 5 percent stake This would clear the way for the majors to tie together their rival gas export projects PNG LNG and Papua LNG Total said it was the operator of Petroleum Retention Licence 15 PRL 15 the joint venture developing the Elk Antelope gas field in Papua New Guinea It said it would remain the largest shareholder with 31 1 percent interest while InterOil and Oil Search hold 28 3 percent and 17 7 percent respectively Total considers that the initial offer by Oil Search for InterOil represented a fair value the company said in statement Analysts said it made more sense for Total to let ExxonMobil take over InterOil Using Elk Antelope to feed an expansion of ExxonMobil s existing PNG LNG plant could generate double the return compared to building Total s proposed 10 billion Papua LNG plant they said While it is possible that they go it alone it would certainly make more economic sense if it was to be combined said Saul Kavonic an analyst at consultancy Wood Mackenzie The oil majors are targeting Papua New Guinea for growth as the quality of its gas low costs and proximity to Asia s big liquefied natural gas LNG consumers make it one of the world s most attractive places for gas projects Total entered Papua New Guinea in 2014 by buying a 40 1 percent stake in Elk Antelope for 401 million up front plus future payments that could range between 594 million and 2 48 billion based on reserves between 7 1 trillion cubic feet and 9 9 tcf according to InterOil Total will have to make those payments to ExxonMobil if the U S firm succeeds in taking over InterOil Total would need to believe in material upside to want to counter bid at this stage Bernstein analyst Neil Beveridge said in a note ExxonMobil offered 45 worth of its own shares plus 7 07 per share for each trillion cubic feet equivalent tcfe above 6 2 tcfe up to a maximum of 10 tcfe Oil Search offered 8 05 of its own shares for every Oil Search share plus 6 05 per share for each tcf above 6 2 tcfe
Oil Search said last week that two experts had concluded that Elk Antelope most likely held 6 43 tcf of recoverable gas with potential for a further 1 2 tcf of gas yet to be certified |
CSCO | Here s How You Should Play Cisco Systems | This Cisco Systems NASDAQ CSCO trade setup has a lot of appeal to it right now It has broken out and above the year long resistance that has formed around the 29 40 level with authority At this point though you have to be careful about adding new long positions on momentum because it s going to take a lot for the market to sustain its current direction without some kind of near term pullback
So am I bullish on Cisco Yes Would I be buying it here Absolutely not I like the chart I like the upside momentum it has displayed but I think it needs to pullback to the 29 to 29 10 area to play a bounce off of long term support If it can do so I give it an upside target of 35 38
If support fails I see it dropping to around 27 |
CSCO | Top Stock Picks For The Week Of July 18th | Cisco Systems Inc NASDAQ CSCO is the worldwide leader in networking for the Internet Cisco s Internet Protocol based networking solutions are the foundation of the Internet and most corporate education and government networks around the world Cisco provides the broadest line of solutions for transporting data voice and video within buildings across campuses or around the world
Barracuda Networks Inc CUDA is engaged in designing and delivering security and storage solutions Its products span three distinct markets including 1 content security 2 networking and application delivery and 3 data storage protection and disaster recovery It offers cloud connected solutions that help its customers address security threats enhance network performance and protect and store their data Barracuda Networks Inc is headquartered in Campbell California |
XOM | U S Data Turns Soft As Negative Surprises Outnumber The Positive | The risk budgets are unchanged again this month For the moderate risk investor the allocation between risk assets and bonds remains at 40 60 It was tempting to raise the risk allocation this month and up our allocation to the weak dollar investments we ve favored for some time But the only indicator that really improved was credit spreads and it was not sufficient to break the widening trend There wasn t enough change in the other indicators to justify increasing our risk posture
As I noted in the most recent Bi Weekly Economic Review the US economic data has recently turned softer with negative surprises far outnumbering the positives Q1 GDP was weak and so far I see no reason to expect Q2 to be any better Inventories are still too high investment is still too low and the two areas that have been positive for growth autos and housing are slowing Residential investment was a positive for GDP in Q1 but recent reports show slowing housing starts and permits The auto industry like a lot of others has an inventory problem and sales peaked months ago This economic weakness is a continuing source of concern and has been a major factor in the US dollar decline a decline that has played a large role in determining investment outcomes this year
Indicator Quick Review
Credit spreads continued to narrow over the last month ending at 6 48 versus the 7 15 in the last report While that is a fairly sizable move for one month it does not change the longer trem trend which is still toward wider spreads In general spreads moved in unison but there were a couple of interesting outliers which I ll discuss below
Valuations US stocks remain very expensive with all the long term measures pointing to well below average returns over the next decade Stocks outside the US generally continue to be the better value choice
Momentum Long term momentum for US stocks is still negative Some shorter term changes in relative performance
Yield curve The yield curve actually steepened a bit during the month but the overall message is that the curve is no longer flattening and is nowhere near flat or inverted
Credit Spreads
Credit spreads continued to narrow over the last month but not enough to break the trend Spreads are moving in lock step with oil prices at this point a mistake in my opinion The credit cycle appears to have peaked and while energy may be the majority of the problem for now it won t stay that way if the economy continues to slow Having said that I was tempted sorely tempted to raise our risk allocation based on the recent narrowing of spreads In the end I decided the breakdown in the dollar was not definitive enough to warrant increasing the international stock or commodity allocations And if risk is added anytime soon that is where it will have to be since valuation and momentum are both currently negative when it comes to US risk assets
Spreads narrowed last month but the widening trend is still intact
Here s another way to look at this relationship that makes the trend a little clearer This is a ratio chart of IEF 7 10 year Treasuries vs HYG Junk bonds When the chart is rising Treasuries are outperforming junk That has been the trend since mid 2014 and it hasn t changed The recent movement is best described as a correction in an ongoing trend That could still change but certainly from this one can t draw that conclusion
Treasuries versus Junk
AAA spreads narrowed considerably over the last month but that s because there are only two left after Exxon Mobil NYSE XOM lost its AAA rating that it has had since the Depression What is actually more interesting is the little tick wider over the last couple of weeks Spreads on JNJ and MSFT are moving wider Well that certainly doesn t seem good
AAA Spreads improved as Exxon Mobil lost its AAA rating
Latin American spreads continued to narrow since the last update too and they do appear to have broken their widening trend Will it be sustained Unknown but probably dependent on a couple of factors First is obviously commodity prices and that means the dollar As I said above I don t think the dollar index has broken down sufficiently to get aggressive with weak dollar investments just yet It is close but no cigar Second is the political situation in Brazil which no one can predict
Is Latin America all better again
Asian spreads are near their lows the widening episode seemingly over However there does seem to be a developing pattern and a move up from here would not be surprising in the least That would probably coincide with a rise in the dollar The concerns in Asia were driven by dollar strength and its effect on China and other dollar debtors in the region
Asia stress is minimal
Credit spreads widened primarily as a function of US dollar strength Falling oil prices threatened the shale industry here in the US and the impact was felt in the junk bond market and in financial institutions with exposure to oil loans More generally falling commodity prices affected emerging markets along with Australia Canada and a few other developed countries Spreads widened in Asia due to fears about dollar denominated debts taken on when the dollar was weak Now that the dollar has fallen those pressures are easing and credit spreads are narrowing
But is the dollar really weak and destined to get weaker The dollar is actually not that weak only falling back to the bottom of the range that has existed since the beginning of last year
The dollar is just back to the bottom of the range
As for its future value that will be determined by the relative difference in growth expectations between the US and the rest of the world Those expectations are generally represented by real interest rates Capital will flow to those areas of the world with relatively high real rates affecting exchange rates I have my doubts about a revival of emerging market growth but capital is flowing back into those markets and it may be a self fulfilling prophecy Does capital flow to emerging markets in anticipation of better growth Or does the capital inflow create the growth A bit of both probably but I m going to need a bit more evidence that this is more than a dead cat bounce before I commit funds to EM bonds or stocks
As for developed markets Europe may be experiencing a bit of a cyclical rebound but their structural problems have not been solved and a stronger Euro won t help But for now the perception seems to be that Europe is improving somewhat relative to the US Japan is a different story and while growth prospects there don t look particularly good real interest rates have been rising relative to the US due to deflation I believe negative interest rates themselves to be deflationary a view I ve held for a while and the rest of the world is coming to now so unless the BOJ is about to hike rates this probably isn t changing soon Research released just this week by the St Louis Federal Reserve supports that view and private researchers have opined similarly My simple supply demand observation is that negative rates are a promise to destroy money and absent a change in demand are therefore positive for the value of the currency involved deflationary The research calls negative rates a tax but it amounts to much the same conclusion
The point is that if real rates are the driver of exchange rates a pretty standard view of things in currency markets negative interest rates ironically make a country s currency more attractive by making it more scarce thereby creating the very thing they were trying to vanquish The Europeans and Japanese central banks would appear to have taken careful aim at their currency war adversaries and shot themselves in their lower extremities
So for now I m content to wait and see if the narrowing trend is sustainable If the dollar falls more then the answer is probably yes If the dollar stabilizes here maybe If the dollar rises the answer is probably no
Yield Curve Bonds
The yield curve steepened ever so slightly since the last GAA update That is primarily a function of the Fed s reluctance to raise rates We started the year with the market expecting a fairly normal pace of rate hikes Then we downshifted to fewer rates hikes and now we re questioning whether we ll get any at all From a yield curve point of view fewer rate hikes means better growth and longer until the next recession I ll take the under on that one but most people take it as a positive so that s how the market reacts
Yield curve has steepened very slightly
Inflation expectations continued to rise until about a week ago It isn t coincidence that inflation expectations stopped rising at the same time the dollar stopped falling Despite all the nonsensical talk about wage inflation rising minimum wages all over the place the fact is that inflation is a currency phenomenon All the measures of inflation CPI PPI GDP deflator etc are nothing more than poor attempts at measuring the value of the dollar its purchasing power Expect inflation expectations to start rising again if when the dollar resumes its downtrend
Inflation expectations were rising but peaked as the dollar bottomed
With TIPS yields still solidly negative upside for the dollar is limited Assuming real rates stay negative and the BOJ and ECB remain clueless about what is driving their currencies likely but not assured the dollar outlook remains negative
TIPS yields real yields are still negative
Nominal bond yields are also still trending down a reflection of nominal growth expectations Unless we see a rapid improvement in the economic data I would expect to break the July 2012 low around 1 43 on the 10 year Treasury If the economy continues to slow the 10 year could easily see 1
Is the 10 Year Treasury yield headed for sub 1 5
Markets continue to tell a story of weak US growth and improving international growth especially in emerging markets Markets can of course be wrong but that s their story and they re sticking to it so far
Valuations
With total market cap GDP at around 120 in the US stocks here are still very expensive That is well above the long term mean about 90 way way above the low 35 and just a bit below the all time high 149 That s just one way of measuring things but all the other methods that provide useful information trailing P E and forward P E are not in that category show similarly high valuations There are areas of the world with cheap markets but they all have problems as cheap markets always do As I ve been saying for some time emerging markets are outright cheap and the cheapest in the world Developed international markets are a little less appealing but still a lot cheaper than the US Cheap EM China Russia Brazil Singapore and India Cheap DM France Italy Spain Canada Australia Netherlands That is not an exhaustive list and it sure isn t a recommendation
Momentum
Short term momentum did roll over as I thought last month but there has been little follow through to the downside I continue to believe based on long term momentum measures among other things that we are putting in a major top for the S P 500 But a top doesn t mean an immediate bear market There are numerous reasons to expect one at some point but that will probably almost certainly be when the next recession hits And while there is a lot wrong with the US economy we aren t in recession yet Some parts of the economy are and some parts of the economy look like they might be headed in that direction but as a whole not yet
Short term momentum rolled over but no follow through yet
Long term momentum remains on a sell signal
Foreign stocks are cheaper than the US and there is a hint of a shift in momentum now too It is tentative and way too early to get too excited but if you squint and add a little confirmation bias
iShares MSCI EAFE NYSE EFA outperforming SPY NYSE SPY short term
Emerging markets have been outperforming the US all year and that is still true but the trend took a big hit the last month
iShares MSCI Emerging Markets NYSE EEM outperformance faded over the last month as the dollar found a short term bottom
As I said above the dollar is just at the bottom of its range and has not broken out to the downside yet However our momentum indicator is on a sell right now This is a monthly signal though and would only be valid if it survives until June We ll see
A potential long term sell signal on the dollar index
Momentum continues to favor SPDR Gold Shares NYSE GLD and bonds over the S P long term
REITs continue to outperform
Japan looks ready to resume its relative outperformance
A final observation the general commodity index ETF iShares S P GSCI Commodity Indexed NYSE GSG is outperforming both the S P and gold over the last month and two months respectively Our momentum indicator has produced buy signals on the daily and weekly charts for GSG vs SPY The monthly chart still needs a little more upside to trigger but my guess is that it is coming I would also expect some kind of correction of the trend short term as the dollar bounces from support This commodity rally looks to me like it has legs but that is dependent on the dollar Ask yourself this question What would make foreigners want to sell dollars in bulk The answer that immediately comes to mind starts with a capital T
I m not making any changes to the portfolios this month It is tempting to raise the allocation to risk assets but in the end there just doesn t seem to be sufficient evidence to do so In investing the right answer to the question of what one should do is more often than not nothing Here s the moderate allocation as it was last month |
XOM | House panel claims oversight of state climate probes into Exxon | By Terry Wade and Ernest Scheyder HOUSTON Reuters A Republican led congressional committee sought on Friday to assert oversight over inquiries that about 20 states are making into Exxon Mobil NYSE XOM and climate change reiterating demands to know more about state attorneys general s consultations with environmental groups In a letter some 17 members of Congress and ranking members of the House Science Space and Technology Committee said they have broad jurisdiction that allows them to review investigations carried out by states The committee was pushing back against state officials who have said they are not subject to federal oversight The standoff is the latest in a high stakes battle between the world s largest publicly traded oil company and a coalition of state attorneys general who have said they would go after Exxon in a bid to force congressional action to tackle climate change About 20 state officials jointly said in March they would participate in inquiries into whether Exxon executives misled the public by contradicting research from company scientists that spelled out the threats of climate change Prior to that March announcement some state officials met with a range of prominent environmental and investment groups that oppose fossil fuels The House committee has complained the inquiries risk stifling free speech and scientific inquiry and that state officials were coordinating with special interest groups The House committee demanded for the second time since May that state officials hand over all records of communications between their offices and outside groups Congress has a responsibility to investigate whether such investigations are having a chilling effect on the free flow of scientific inquiry and debate regarding climate change the letter said People should be troubled by any attempt by members of Congress to silence or undercut basic investigatory authority by a state attorney general s office said Cyndi Roy Gonzalez a spokeswoman for Massachusetts Attorney General Maura Healey Our office will not be intimidated by oil industry backed members of the U S House of Representatives Exxon for its part has said it has acknowledged the reality of climate change for years and communicated this to investors
On Wednesday Exxon asked a federal court to throw out a subpoena that would force it to hand over decades of documents on climate change to Healey s office |
XOM | U S states Rockefellers clash with U S House panel on Exxon climate probes | By Terry Wade HOUSTON Reuters With a number of U S states proceeding with investigations of Exxon Mobil Corp s N XOM record on climate change the attorney general of Massachusetts and investment funds of the Rockefeller family on Friday told a Congressional committee it lacked powers to oversee those probes The pushback is the latest chapter in a high stakes fight between the world s largest publicly traded oil company and a coalition of state attorneys general who have said they would go after Exxon to try and force action to tackle climate change The House Committee on Science Space and Technology last week reiterated demands that state attorneys general hand over any records of consultations the prosecutors had with outside environmental groups before their probes were opened Republicans on the committee have said about 20 state officials overreached when they jointly said in March they would participate in inquiries into whether Exxon executives misled the public by contradicting research from company scientists that spelled out the threats of climate change State officials have said the committee has no right to get involved The Committee lacks authority to interfere with an investigation by the Massachusetts Attorney General s Office into possible violations of Massachusetts law by ExxonMobil said a letter to the committee from the office of Massachusetts Attorney General Maura Healey that was seen by Reuters In another letter to the House panel seen by Reuters the Rockefeller Brothers Fund and the Rockefeller Family Fund two investment funds that have been critical of fossil fuels linked to climate change said the committee s request imperiled the funds First Amendment rights and said Congress s investigatory power is not unlimited Last week Exxon asked a federal court to throw out a subpoena that would force it to hand over decades of documents on climate change to Healey s office
Both sides in the standoff have sought to use the First Amendment of the Constitution which guarantees freedom speech and freedom of assembly among other protections to press their cases The House committee has complained the inquiries risk stifling free speech and scientific inquiry and that state officials were coordinating with special interest groups Exxon which declined to comment on Friday has repeatedly said that it has acknowledged the reality of climate change for years and communicated this to investors |
XOM | Iraq s southern oil exports seen steady through 2016 at 3 162 million bpd | By Aref Mohammed BASRA Iraq Reuters Oil exports from Iraq s southern ports have averaged 3 162 million barrels per day bpd so far this month down slightly from May due to maintenance work and rising demand for fuel oil used in power generation a senior oil official said The exports including 850 000 barrels of Basra Heavy are expected to hold steady through the end of the year Hayan Abdulghani Abdulzahra the head of state owned South Oil Company SOC told Reuters in an interview late on Sunday With the start of summer demand for crude oil from power stations and refineries has increased to around 550 000 barrels per day and this comes at the expense of exports he said Power stations and refineries had been using 400 000 bpd before high temperatures boosted electricity consumption he said OPEC s second largest producer aims to increase its southern oil storage capacity to 14 million bpd by the first quarter of 2018 from 11 5 million currently to help cope with export bottlenecks caused by bad weather and to absorb an expected rise in output Abdulzahra said The country plans to bring a fourth single point mooring SPM facility online by mid 2017 to boost export capacity from southern terminals to 4 5 million bpd from 3 6 million currently he said Iraq last year was OPEC s fastest source of supply growth boosting output by more than 500 000 barrels per day despite spending cuts and conflict with Islamic State militants A collapse in global prices LCOc1 which at 47 a barrel are less than half their level of two years ago has hit revenue for the government which relies on oil for nearly all its income The price drop has raised concern that Iraq s oil output growth could slow or stall Indeed oil companies have warned Iraq that projects will be delayed if the government insists on drastic spending cuts this year Abdulzahra said more talks were needed with ExxonMobil N XOM and PetroChina HK 0857 which Iraq approached last year about a multi billion dollar project to boost output from Nahr Bin Umar and Artawi two smaller southern oilfields now producing 35 000 and 17 000 bpd respectively We reached an initial agreement that production from both fields should reach 550 000 barrels per day he said without specifying a timeframe SOC is seeking investments from the two companies to build infrastructure needed to raise output at fields it operates Most of Iraq s production comes from five giant fields Abdulzahra said production from BP s L BP Rumaila oilfield Iraq s largest is currently at 1 45 million bpd more than 60 000 barrels higher than last year
West Qurna 1 developed by Exxon Mobil is producing 450 000 bpd while Lukoil s MM LKOH West Qurna 2 produces 405 000 bpd he said Output from Shell s L RDSa Majnoon is at 220 000 bpd and at Eni s MI ENI Zubair at 360 000 barrels Additional reporting and writing by Ahmed Rasheed editing by David Evans |
CSCO | Cisco s Cloud To Secure Digital Business Models Better | Cisco Systems Inc NASDAQ CSCO has announced new cloud based solutions and services built around its threat centric security architecture for companies looking for a more effective approach to secure their digital businesses Cisco s ramped up security portfolio now features services like Umbrella Roaming Security for Digital Transformation Defense Orchestrator Stealthwatch Learning Network License Umbrella Branch and Meraki MX Security Appliances with Advanced Malware Protection AMP and Threat Grid with the goal of plugging security loopholes at access and end points of the network ThreatsWith rapid digital transformation more and more devices applications and users are getting connected to the Internet every day Though this translates to greater opportunities for technology companies it has also made organizations and businesses more prone to security threats Security Effectiveness GapThe conventional approach calls for the use of about 70 disparate security products in tandem to resolve a variety of issues This makes it a very cumbersome process for organizations while leaving them more vulnerable to the online threats Additionally this niche product approach to security can often result in unmanageable complexity leading to security loopholes The Cisco WayFewer Complexities More Capabilities Cisco s cloud based security portfolio aims to close the security effectiveness gap through its threat centric security architecture which drastically reduces the complexities while increasing the capabilities Mobile Security With a number of integrated products and increased network visibility deploying effective security for mobile or distributed businesses is expected to become much easier as everyone will be protected through the cloud no matter where they are To ConcludeCisco s claim to detect and resolve the threats in under 17 hours is in stark contrast to what Cisco says is the industry standard of 100 days This may be true since the Cisco solution deals with security in the network thus preventing access to compromised data It could therefore set a new benchmark for the security industry going forward
Zacks Rank
At present Cisco has a Zacks Rank 2 Buy
Investors interested in the same space may also consider Extreme Networks Inc NASDAQ EXTR and Radcom Ltd NASDAQ RDCM both carrying a Zacks Rank 2 A stock worth considering in the broader technolgy sector is Ellie Mae Inc NYSE ELLI also carrying the same Zacks Rank |
CSCO | This Week s Top Value Stocks HMY CSCO | Looking for the best value stocks Tracey Ryniec Stock Strategist at Zacks Investment Research discusses two stocks that might be worth a closer look by value investors Harmony Gold HMY and Cisco Systems Inc NASDAQ CSCO
With the S P 500 at new record highs it s hard to find true value stocks
But both companies have forward P Es well below the average of the S P 500 which is now a sky high level of 18 They also are in favor with analysts as 2015 and 2016 earnings estimates have been moving higher Both companies are Zacks Rank 2 Buys
Who knew a hot gold miner and an old tech favorite would be values at the same time in 2016
But what else should investors take away from these two companies Watch our short video below to learn more about these value stocks |
MRO | Middle East tensions have put a floor under oil prices says Marathon Oil CEO | Marathon Oil Chairman and CEO Lee Tillman said that while oil prices may not be spiking in response to Thursday s airstrike in Iraq ongoing tensions in the Middle East will support higher oil prices going forward He attributed the lack of a stronger initial price reaction to the United States surge in production I think the dampening effect is really the impact of the U S energy renaissance he said Tuesday on CNBC s Power Lunch from the Goldman Sachs energy conference in Miami Beach Florida We make up about 8 of the global supply today and those are reliable highly secure barrels that the market is counting on and I do believe that s reduced this risk premium from returning back into the market That said he argued that U S West Texas Intermediate crude prices will likely end the year higher since tensions are likely going to persist which creates a bit of a floor under oil and gas pricing Tillman s comments come as oil prices spiked more than 3 on Friday following Thursday s killing of Iran s top commander Qasem Soleimani But since then some of the enthusiasm has faded On Monday oil settled little changed and on Friday prices declined 1 Marathon focuses on oil and gas exploration and production and is a player in the U S shale industry with operations focused on Texas New Mexico Oklahoma and North Dakota The company also has sites in Equatorial Guinea The stock has shed 12 over the last year underperforming the energy sector s 0 6 decline and the S P 500 s 27 gain Correction An earlier version of this article said that the company currently has interests in the United Kingdom CNBC s Stefanie Kratter contributed reporting |
MRO | Marathon Oil misses Q4 number amid lower oil and gas prices | Marathon Oil NYSE MRO 2 6 after hours following its Q4 earnings miss and 31 Y Y drop in revenues as weaker oil and gas prices more than offset strong U S shale production
Marathon says its Q4 average realized prices for crude oil and condensate in the U S fell 2 1 to 54 83 bbl
Q4 total production rose marginally to 413K boe day with U S output increasing 9 Y Y on a divestiture adjusted basis to 328K boe day
For 2020 Marathon plans a total capital budget of 2 4B down 11 from 2019 including a development capital budget of 2 2B 9 below the previous year with 6 U S oil production growth at the midpoint of guidance
For Q1 Marathon forecasts U S oil production of 192K 202K boe day
The company adds that 2020 international gas production will be slowed by scheduled maintenance activity in Equatorial Guinea during Q4 |
XOM | Oil rises back towards 8 month highs amid global supply outages | Investing com Oil prices rose towards an eight month high in North American trade on Monday as investors shifted their focus back to global supply outages
Concerns over a disruption to Nigerian supplies escalated after the Niger Delta Avengers militant group claimed responsibility for three new attacks on the country s oil infrastructure over the weekend promising to cut production to zero
Meanwhile in the U S Exxon Mobil NYSE XOM reported a pipeline failure and spill at its Torrance refinery near Los Angeles
Oil prices have been well supported in recent weeks as traders eyed supply disruptions in Nigeria France Canada and Venezuela
On the ICE Futures Exchange in London Brent oil for August delivery rose to an intraday high of 50 78 a barrel It last stood at 50 47 by 13 35GMT or 9 35AM ET up 83 cents or 1 67
Brent prices hit an eight month peak of 50 96 in late May as unplanned supply disruptions in Africa eased concerns over a global glut Brent futures prices are up by roughly 85 since briefly dropping below 30 a barrel in mid February
Elsewhere crude oil for July delivery on the New York Mercantile Exchange tacked on 93 cents or 1 91 to trade at 49 55 a barrel after rising to a daily peak of 49 85
New York traded oil lost 55 cents or 1 12 on Friday after data showed the U S oil rig count rose the first time in 11 weeks last week
Oilfield services provider Baker Hughes said Friday that the number of rigs drilling for oil in the U S increased by nine last week to 325 ending three straight months of weekly declines
The renewed gain in U S drilling activity fueled speculation that domestic production could be on the verge of rebounding in the weeks ahead underlining worries over a supply glut
U S crude futures are still up nearly 80 since falling to 13 year lows at 26 05 in February as a decline in U S shale production boosted sentiment However with prices now at levels that make drilling economical for some firms the oil rig count might start rising further and the decline in U S production may slow
Meanwhile Brent s premium to the WTI crude contract stood at 92 cents a barrel compared to a gap of 1 02 by close of trade on Friday |
XOM | Shell CEO eyes top spot with post BG deal refocus | By Ron Bousso and Karolin Schaps LONDON Reuters Royal Dutch Shell L RDSa plans to increase cost savings to 4 5 billion following its 54 billion acquisition of BG Group which Chief Executive Officer Ben van Beurden said will make it the best oil company investment ahead of Exxon Mobil N XOM In its first long term strategy presentation since February s deal Shell unveiled plans to limit spending and exit countries in order to focus on the most profitable operations such as liquefied natural gas LNG deepwater oil production and chemicals The company also detailed longer term plans to grow its shale oil and gas production and green energy as it switches to cleaner resources The combination of BG catapulted Shell to the world s second biggest international oil company behind Exxon by market capitalisation and production Shell became the top liquefied natural gas trader and a major deepwater oil producer by increasing its position in Australia and Brazil Van Beurden hopes the new strategy to generate double digit returns will boost investor confidence and lift Shell s share price which has underperformed rivals since the BG deal was announced in April last year The deal also doubled its debt to equity ratio to 26 percent leading to credit rating downgrades For the first 90 years of Shell s existence we were the industry leader in total shareholder return But we lost the lead in the 1990s said the 58 year old Dutchman who was appointed in early 2014 I am determined to get us back to that number one position Shell targets a 10 percent return in capital employed by the end of the decade assuming an oil price of around 60 a barrel up from around 8 percent between 2013 and 2015 Shell s year to date total return was minus 3 2 percent while Exxon shares offered returns of 10 percent according to Thomson Reuters data The Anglo Dutch company has been the only one among the group of oil majors to make a large acquisition in the current downturn as rivals focused on cutting spending With all promises to shareholders maintained and lower forward capex than many thought possible Shell in their own words is creating a world class investment case which we agree with said analysts at Bernstein who rate Shell outperform Shell s shares were up 2 4 pct to 1742 pence by 1342 GMT EXITS A key element of van Beurden s plan will include narrowing its global activity Shell said on Tuesday it will exit oil and gas operations in up to 10 countries and sell 10 percent of its production as part of a 30 billion asset sale plan by 2018 The company is active in more than 70 countries but wants to focus on 13 nations including Brazil Australia and the United States It did not say which countries it might exit Reuters has reported that Shell plans to sell its assets in Gabon Shell lowered its planned 2016 capex to 29 billion with exploration set at 2 5 billion in a third cut from an initial 35 billion Cost savings will come from 12 500 job cuts in 2015 and this year and overlaps in operations in areas including Australia Brazil and the North Sea The company said its medium term growth priorities were deepwater projects in Brazil and the Gulf of Mexico and its chemicals division particularly in the United States and China Deepwater production could double to some 900 000 barrels of oil equivalent per day in 2020 It also gave the go ahead for investing in a new cracker and polyethylene plant in the United States one of a handful of investment decisions this year as it grapples with the sharp drop in oil prices over the past two years Shell will slow new investment in its integrated gas business which includes LNG which it said has reached critical mass following the BG acquisition
In the long term the company said it would target shale oil and gas production in North America and Argentina as well as biofuels hydrogen solar and wind in a new energies unit |
XOM | Dozens reported wounded as PNG police fire on protesters riots spread | By Colin Packham and Matt Siegel SYDNEY Reuters Dozens of people were wounded and four reported killed in Papua New Guinea on Wednesday after police opened fire on a student demonstration in the capital and riots erupted across the country officials and residents said A groundswell of political unrest has surged in the island nation just to Australia s north in recent weeks amid calls for Prime Minister Peter O Neill to resign over corruption allegations People in Port Moresby reported police firing on the public and using tear gas to disperse crowds during a protest at the University of PNG s Waigani campus Protests were later reported in the PNG Highland cities of Goroka and Mt Hagen and in Lae on the north coast PNG media and one international aid agency which declined to be identified because it only had preliminary information said a clinic at the university had reported up to four students had been killed although there was no confirmation Now there is a very big clash with the public and with the police just outside the Port Moresby General Hospital a hospital official told Reuters by telephone after a group of wounded students were taken there for treatment There is also shooting going on open gunfire Papua New Guinea formerly administered by Australia struggles with endemic violence and poverty despite a wealth of mineral resources It is ranked 139 out of 168 in Transparency International s corruption index Wednesday s events echoed a similar confrontation when police opened fire on anti government student protesters in 2001 A full account of that incident has never been given An official at the Port Moresby General Hospital said 38 casualties had been treated there O Neill said no students had been killed that five wounded protesters were in stable condition The facts relayed to me are that a small group of students were violent threw rocks at police and provoked a response that came in the form of tear gas and warning shots O Neill said in a statement dismissing calls by students for him to stand down The Australian government which routinely warns of high levels of serious crime and lawlessness said there had been an unconfirmed number of deaths and serious injuries The U S embassy in Port Moresby told its citizens to avoid areas hit by violence The situation is still volatile and could escalate at any time it said in a statement Later on Wednesday Virgin Australia said in a statement it had turned around a flight from Brisbane to Port Moresby due to safety concerns regarding civil unrest in Port Moresby No other flight disruptions were reported PEOPLE FLEEING Hubert Namani a lawyer and business leader said public transport had been halted and businesses shut People are looting and rioting and sort of revolting so the police are now caught trying to manage all of that Namani told Reuters by phone from Port Moresby Noel Anjo one of the leaders of the student protest said the violence began when students started a planned march from the campus towards the parliament building in the capital where police had set up a road block Police did not like that idea and started assaulting the students punching them hitting them with the gun butts before firing shots at them Anjo said The students were running for cover in all directions but I saw some people badly wounded he said There was no immediate comment from police in Port Moresby TEAR GAS GUNFIRE Video on social media showed students fleeing amid clouds of tear gas and the sound of gunfire Pictures showed several men with what appeared to be serious stomach chest and leg wounds Thousands of students across PNG have been protesting and boycotting classes for weeks amid growing political unrest O Neill who came to power in 2011 promising to reign in corruption has faced allegations he authorised millions of dollars in fraudulent payments to a leading law firm In 2014 an anti corruption watchdog issued an order for his arrest over the incident which O Neill denies He refused to submit to the warrant and ordered the watchdog stripped of its funding Most of Papua New Guinea s seven million people live subsistence lives in isolated mountain villages and scattered tropical islands Despite that an energy production boom which includes Exxon Mobil s N XOM 20 billion LNG plant has fuelled annual economic growth of almost 10 percent a year for the past three years Newcrest Mining AX NCM which operates two remote gold mines in PNG and Oil Search Ltd AX OSH said their operations had not been affected There was no comment available immediately from Exxon Mobil in PNG This is going to get worse before it gets better said Greg Anderson executive director of the Papua New Guinea Chamber of Mines and Petroleum in Port Moresby Incidents like this trigger paybacks which could easily spiral out of control he said Western tourists and workers in Port Moresby said the city was in gridlock
Oliver Fowler director of Australia based Adventure Bound Tours said he was reconsidering his next scheduled trip in August We might have to put it off It s really going to affect the industry he said |
MRO | Is A Beat In Store For Marathon Oil s MRO Q4 Earnings | Marathon Oil Corporation NYSE MRO is scheduled to release fourth quarter 2019 results on Feb 12 after the closing bell The current Zacks Consensus Estimate for the to be reported quarter s earnings is 8 cents per share on revenues of 1 27 billion Against this backdrop let s delve into the factors that might have impacted the company s performance in the December quarter As far as earnings surprises are concerned this Houston Texas based Marathon Oil boasts an excellent record having surpassed the Zacks Consensus Estimate in all the trailing four quarters the average being 197 8 This is depicted in the graph below Marathon Oil Corporation Price and EPS Surprise Factors at PlayStrong operational performance at Marathon Oil s US resource basin division which is responsible for more than three fourth of the total production is likely to have contributed to the fourth quarter bottom line In the previous three month period the company s output of oil and natural gas increased 11 5 from the prior year s corresponding period a trend that most likely continued in the fourth quarter as well owing to focused capital spending Evidently the Zacks Consensus Estimate for fourth quarter net sales volume from the United States is pegged at 332 Boe d indicating an increase of 8 85 from the year ago reported figure Importantly volume growth is likely to have been achieved on lower costs During the third quarter Marathon Oil s U S production costs were down 23 from the year ago period to 4 75 per Boe Continued progress on the cost front primarily on account of portfolio optimization efforts might have aided the company s bottom line growth in the to be reported quarter despite a weak oil price environment What Does Our Model Say The proven Zacks model predicts an earnings beat for Marathon Oil this season The right combination of a positive and a Zacks Rank 1 Strong Buy 2 Buy or 3 Hold increases the odds of a positive surprise You can uncover the best stocks to buy or sell before they re reported with our Earnings ESP Marathon Oil has an Earnings ESP of 3 90 Zacks Rank Marathon Oil carries a Zacks Rank 2 which increases the predictive power of ESP Highlights of Q3 EarningsMarathon Oildelivered stellar third quarter 2019 results wherein both earnings and revenues surpassed the respective Zacks Consensus Estimate Better than expected net sales volumes led to this outperformance Precisely the same totalled 427 thousand barrels of oil equivalent per day MBOE d topping the Zacks Consensus Estimate of 394 MBOE d Its adjusted income from continuing operations came in at 14 cents per share outpacing the Zacks Consensus Estimate of 4 cents However the metric plunged nearly 42 from the year ago earnings of 24 cents Notably decreased average price realizations of crude oil and condensate from the International E P segment induced this year over year fall However quarterly revenues of 1 345 million beat the Zacks Consensus Estimate of 1 264 million But the top line was 19 3 lower than the prior year figure of 1 667 million Other Stocks to ConsiderHere are some other stocks worth considering from the space as per our model shows that these too have the perfect combination of elements to beat on earnings this reporting cycle Viper Energy Partners L P NASDAQ VNOM has an Earnings ESP of 20 74 and a Zacks Rank 3 The company is slated to report fourth quarter earnings on Feb 11 TC Energy Corporation TSX TRP has an Earnings ESP of 0 65 and a Zacks Rank of 2 The company is slated to announce fourth quarter 2019 earnings on Feb 13 Tallgrass Energy GP L P NYSE TGE has an Earnings ESP of 2 06 and is Zacks 2 Ranked The partnership is slated to release fourth quarter earnings on Feb 12 You can see Just Released Zacks 7 Best Stocks for TodayExperts extracted 7 stocks from the list of 220 Zacks Rank 1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of 24 7 per year These 7 were selected because of their superior potential for immediate breakout |
MRO | Why Marathon Oil MRO Might Surprise This Earnings Season | Investors are always looking for stocks that are poised to beat at earnings season and Marathon Oil Corporation NYSE MRO may be one such company The firm has earnings coming up pretty soon and events are shaping up quite nicely for their report That is because Marathon Oil is seeing favorable earnings estimate revision activity as of late which is generally a precursor to an earnings beat After all analysts raising estimates right before earnings with the most up to date information possible is a pretty good indicator of some favorable trends underneath the surface for MRO in this report In fact the Most Accurate Estimate for the current quarter is currently at 9 cents per share for MRO compared to a broader Zacks Consensus Estimate of 8 cents per share This suggests that analysts have very recently bumped up their estimates for MRO giving the stock a Zacks Earnings ESP of 3 90 heading into earnings season Marathon Oil Corporation Price and EPS Surprise Why is this Important A positive reading for the Zacks Earnings ESP has proven to be very powerful in producing both positive surprises and outperforming the market Our recent 10 year backtest shows that stocks that have a positive Earnings ESP and a Zacks Rank 3 Hold or better show a positive surprise nearly 70 of the time and have returned over 28 on average in annual returns see more Given that MRO has a Zacks Rank 3 and an ESP in positive territory investors might want to consider this stock ahead of earnings You can see the complete list of today s Zacks 1 Rank Strong Buy stocks here Clearly recent earnings estimate revisions suggest that good things are ahead for Marathon Oil and that a beat might be in the cards for the upcoming report Zacks Top 10 Stocks for 2020 In addition to the stocks discussed above would you like to know about our 10 finest buy and hold tickers for the entirety of 2020 Last year s 2019 Zacks Top 10 Stocks portfolio returned gains as high as 102 7 Now a brand new portfolio has been handpicked from over 4 000 companies covered by the Zacks Rank Don t miss your chance to get in on these long term buys |
MRO | Marathon Oil MRO Q4 Earnings And Revenues Lag Estimates | Marathon Oil NYSE MRO came out with quarterly earnings of 0 07 per share missing the Zacks Consensus Estimate of 0 08 per share This compares to earnings of 0 15 per share a year ago These figures are adjusted for non recurring items
This quarterly report represents an earnings surprise of 12 50 A quarter ago it was expected that this energy company would post earnings of 0 04 per share when it actually produced earnings of 0 14 delivering a surprise of 250
Over the last four quarters the company has surpassed consensus EPS estimates three times
Marathon Oil which belongs to the Zacks Oil and Gas Integrated United States industry posted revenues of 1 22 billion for the quarter ended December 2019 missing the Zacks Consensus Estimate by 4 13 This compares to year ago revenues of 1 77 billion The company has topped consensus revenue estimates two times over the last four quarters
The sustainability of the stock s immediate price movement based on the recently released numbers and future earnings expectations will mostly depend on management s commentary on the earnings call
Marathon Oil shares have lost about 14 8 since the beginning of the year versus the S P 500 s gain of 3 9
What s Next for Marathon Oil
While Marathon Oil has underperformed the market so far this year the question that comes to investors minds is what s next for the stock
There are no easy answers to this key question but one reliable measure that can help investors address this is the company s earnings outlook Not only does this include current consensus earnings expectations for the coming quarter s but also how these expectations have changed lately
Empirical research shows a strong correlation between near term stock movements and trends in earnings estimate revisions Investors can track such revisions by themselves or rely on a tried and tested rating tool like the Zacks Rank which has an impressive track record of harnessing the power of earnings estimate revisions
Ahead of this earnings release the estimate revisions trend for Marathon Oil was mixed While the magnitude and direction of estimate revisions could change following the company s just released earnings report the current status translates into a Zacks Rank 3 Hold for the stock So the shares are expected to perform in line with the market in the near future You can see the complete list of today s Zacks 1 Rank Strong Buy stocks here
It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead The current consensus EPS estimate is 0 16 on 1 32 billion in revenues for the coming quarter and 0 52 on 5 31 billion in revenues for the current fiscal year
Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well In terms of the Zacks Industry Rank Oil and Gas Integrated United States is currently in the top 17 of the 250 plus Zacks industries Our research shows that the top 50 of the Zacks ranked industries outperform the bottom 50 by a factor of more than 2 to 1 |
CSCO | 3 High Value Buy Ranked Stocks For Uncertain Times | In the weeks following the United Kingdom s decision to leave the European Union investors continue to weigh its effects on global markets In times of uncertainty many investors looks to solid value dividend paying stocks for a source of income and for some protection to downside risk But what s the easiest way to find these stocks
Many investors know that screening is a very powerful way to find the best stocks but creating your own screens can be difficult and time consuming However with Zacks Premium Screens finding the best stocks is just a few clicks away
To show just how easy it can be I have used one of Zacks Premium Screens named the High Rank Value screen Though they are already implemented for you the parameters of this screen is that the stocks must be a Zacks Rank 1 Strong Buy or 2 Buy a dividend yield greater than 2 a PE ratio less than 15 and a price to book ratio less than 3
Below are 3 high value stocks that also have top Zacks Ranks and solid dividend payments that were found from using the High Rank Value premium screen
Gannet Co Inc NYSE GCI
Gannet Co Inc operates as a multi platform news and information company The company s operations comprise of USA Today 92 daily local publications in the US and Guam approximately 400 non daily publications in the US and approximately 150 local news brands online mobile and in print in the UK It also provides commercial printing marketing and data services
GCI is a Zacks Rank 1 Strong Buy stock that operates in an industry ranked in the top 3 of all industries by Zacks The company has an A for its Value Style Score which is backed up by a dividend payment of 4 80 a low PE ratio of 8 72 a price to sales ratio of 51 and an earnings yield of 11 17 The company also has a B Growth Style Score which can be attributed to projected sales growth of 6 13 and a net margin of 5 10
American Eagle Outfitters Inc NYSE AEO
American Eagle Outfitters Inc operates as a specialty retailer offering on trend clothing accessories and personal care products under the American Eagle Outfitters and Aerie brands The company provides denim bottoms and other apparel as well as footwear and accessories for men and women as well as intimates apparel and personal care products for women AEO is currently a Zacks Rank 2 Buy stock and offering a strong dividend payment of 3 13
The company also has an A for its Value Style Score with a low PE ratio of 12 60 a price to sales ratio of 79 and cash flow per share of 1 86 The company also has strong growth opportunities too with current year projected sales growth of 3 32 and projected EPS growth of 16 16 an ROE figure of 20 18 and a net margin of 6 43 There also has been a great deal of EPS estimate revision activity lately with 10 analysts raising their current year EPS estimates in the last 60 days
Cisco Systems Inc NASDAQ CSCO
Cisco Systems Inc is a worldwide leader in networking for the internet The company s internet protocol based networking solutions are the foundation of the internet and most corporate education and government networks around the world Cisco is a Zacks Rank 2 Buy and offers a solid dividend yield of 3 67
The company also has a B for its Value Style Score which can be attributed to a PE ratio of 13 30 an earnings yield figure of 7 40 and cash flow per share of 2 49 Cisco also is projected to see EPS growth of 7 04 this year There has also been a great deal of upward estimate revision activity lately with 4 analysts raising their current year EPS estimates in the last 60 days
Bottom Line
As history tends to show and many investors will agree solid value dividend paying stocks tend to be a successful strategy to provide outperforming returns while at the same time providing some downside risk in times of uncertainty like the present global market right now
As the three stocks above show the capabilities of the Zacks Premium Stocks offer top stock investment options with just a few clicks The screens are already made for investors All you have to do is choose the screen you wish to use whether it be for top ranked high yield dividend stocks like these or for stocks that the multitude of other screens can help investors find
To use more than 45 predefined screens strategically created to find the best stocks and access even more proven tools and resources |
XOM | Commodities FED And Big Oil s Challenge | Good Morning
Yesterday s quiet trading day may be a little louder today The FED is not expected to raise rates but the verbiage after the announcement and earnings could make for an interesting day A lot of chatter in the Energy sector where the weekly API showed Crude supplies fell 1 1 million barrels And Exxon Mobil s NYSE XOM downgrade leaves two AAA rated companies in the U S This is also a sign of healthy oil companies are good for the U S economy with smaller companies not able to sustain the vicious drop in oil prices and majors that were creating jobs exploration and capital spending creating exploration Unfortunately with banks not loaning money with oil at price levels all these projects have been shelved and the people they laid off and projects that have been retreated from may be gone for good This morning we will have the EIA data that should confirm the API data In the overnight electronic session the June Crude Oil is currently trading at 4483 which is 79 points higher The trading range has been 4513 to 4440
On the Natural Gas front another reminder that the May contract expires today The June contract is currently trading at 2 173 in the overnight electronic session which is 014 cent higher The trading range has been 2 199 to 2 166
On the Ethanol front there were no trades posted in the overnight electronic session The May contract settled at 1 545 and is currently showing 7 bids 1 525 and 1 offer 1 558
On the Corn front the market is trading a little easier with the rest of the complex Rains and cooler temperatures will effect areas that are behind in plantings In the overnight electronic session the May Corn is currently trading at 380 which is of a cent lower The trading range has been 382 to 380 Better talk of crop conditions coming out Argentina and Brazil are pressuring this market
Have a Great Trading Day |
XOM | ExxonMobil XOM Tops Q1 Earnings And Revenue Estimates | ExxonMobil Corporation NYSE XOM posted first quarter 2016 earnings of 43 cents per share that beat the Zacks Consensus Estimate of 31 cents A resilient integrated business model enabled the energy behemoth to beat estimates despite the current environment of relentlessly falling commodity prices The bottom line however deteriorated from 1 17 in the year ago quarter The impact of sharply lower commodity prices and weaker refining margins were partly offset by strong Chemical results Total revenue in the quarter decreased to 48 707 million from 67 618 million in the year ago quarter The top line however was ahead of the Zacks Consensus Estimate of 48 137 million Operational PerformanceUpstream Quarterly earnings for the segment declined 2 9 billion from the first quarter of 2015 to a loss of 76 million Lower liquids and gas realizations hurt earnings by 2 6 billion The effect of sales mix lowered earnings by 100 million Production averaged 4 325 million barrels of oil equivalent per day MMBOE d up 1 8 year over year Liquid production increased 11 5 year over year to 2 538 million barrels per day Natural gas production was 10 724 MCF d millions of cubic feet per day down 1 104 MCF d from the year ago period Downstream The segment recorded profits of 906 million down 761 million from the first quarter of 2015 Weaker margins affected earnings by 860 million Volume and mix effects increased earnings by 10 million ExxonMobil s refinery throughput averaged 4 185 million barrels per day MMBPD down from the year earlier level of 4 546 MMBPD Chemical This unit contributed approximately 1 4 billion which was 373 million higher than the first quarter of 2015 Improved margins boosted earnings by 250 million Favorable volume and mix effects increased earnings by 80 million FinancialsDuring the quarter ExxonMobil generated cash flow from operations and asset sales of 5 billion The company returned 3 1 billion to shareholders through dividends and share repurchases Capital spending decreased 33 year over year to 5 1 billion Zacks RankExxonMobil currently has a Zacks Rank 3 Hold Some better ranked stocks from the same space are SunCoke Energy Inc NYSE SXC PetroChina Co Ltd NYSE PTR and Braskem S A NYSE BAK Each of these stocks holds a Zacks Rank 1 Strong Buy |
MRO | Go West Nigerian oil skirts U S shale boom in journey to California | By Noah Browning and Libby George
LONDON LAGOS Reuters Nigeria s oil displaced by U S shale has found an unlikely new outlet this year the coast of the continental United States that is farthest from the African country s shores
The shale boom has upended the global market turning the United States from a keen buyer of Nigerian oil to an aggressive competitor
But no pipelines easily connect the shale hub at the Permian basin located in Texas and New Mexico to the West Coast driving the latter to look to Nigeria to quench its thirst for crude
Early this year Californian refineries began loading up on Nigerian oil taking cargoes of Qua Iboe Bonga Erha Forcados and others according to traders and Refinitiv Eikon data
Graphic Nigerian oil to U S West Coast
The more than 6 million barrels that the U S West Coast imported from Nigeria between April and August this year was almost four times higher than the amount for all of 2018
The route is relatively rare for cargoes that must weather the 20 000 km 12 500 mile 40 day journey from Nigeria s lush coasts around South America s Tierra del Fuego and up to Los Angeles
Graphic Routes of selected West African oil cargoes discharging in California
Marathon Oil NYSE MRO at its Long Beach refinery has been the most consistent buyer with another very large crude carrier VLCC full of Forcados oil departing Nigeria on Thursday
Traders said a combination of market factors including the difficulty and expense of getting U S crude oil to the West Coast made Nigerian grades attractive
It makes more cost sense Even if U S crude is closer on the map when you factor in the price and availability of taking in barrels from Louisiana or Nigeria Nigeria came out cheaper one seller of West African oil said
The purchases are a rare glimmer of hope this year for Nigerian oil which now competes with U S shale for buyers including in its top outlet India
The United States had historically been a heavy importer of crude oil but shale production coupled with the lifting of a four decade export ban transformed it into a net exporter of oil and fuels by late last year
Graphic U S Imports from Nigeria of Crude Oil
Barrels from this U S oil bonanza sailing to domestic shores face added costs however due to a century old law called the Jones Act which mandates that only U S flagged vessels can transport it
The restriction often makes freight within the United States more costly than much longer journeys
But traders warn the surprise opening of the West Africa West Coast export window or arb could be short lived due to the timescales and distance involved
The arb may be already shutting The price factors which made a cargo exporting today look like a good deal would have been happening over a month ago when the deal was made a major buyer of West African oil said
They won t be the same today and certainly won t be the same over a month from now when the cargo arrives
The need to refine oil into low sulphur shipping fuels in time for stricter environmental rules on Jan 1 may also have lured those cargoes as West Africa is home to the kinds of crude most suited to such products This boon could be fleeting too
The honeymoon will be over in a year from now said Ehsan Ul Haq lead analyst with Refinitiv
At present all refiners are desperate to produce marine gasoil or very low sulphur fuel oil Once the market reaches equilibrium there will be less interest |
XOM | Managers take over operations reopen pipes at French oil hub | By Bate Felix PARIS Reuters Managers have taken over operations and reopened pipes at the CIM oil port terminal in Le Havre northern France after union members decided to extend their strike on Friday a CGT union official said CIM which handles about 40 percent of French crude imports has not been able to deliver crude to refineries and refined products to the market since Tuesday after workers joined a nationwide rolling strike against planned labor reforms Unions teachers students and youth groups led the initial strikes and protest in March and April against the labor law changes but opposition was faltering until the government began the process of forcing the bill through the lower house of parliament on May 10 The oil workers intervention has given the protests which began in March new impetus The CGT objects particularly to proposals that would let companies opt out of national obligations on labor protection if they adopt in house deals on pay and conditions with the consent of a majority of employees Managers have taken over control of CIM and they have started to reopen pipes because Exxon s Gravenchon refinery which was still operating was running low on crude CGT union official Thierry Defrense told Reuters This was ordered by the local government official Defrense said The company is central to France s oil sector with its 2 4 million cubic meters of crude storage capacity and 1 7 million cubic meters of refined products storage capacity that includes jet fuel diesel petrol and naphtha at Le Havre port CIM supplies nearby Exxon Mobil s N XOM 240 000 barrel per day Port Jerome Gravenchon refinery one of three out of eight refineries in France that has not been halted by the strike A spokeswoman for Exxon said the refinery began to receive crude from CIM around midday on Friday after the pipes were reopened CIM s 150 CGT members out of a staff of 260 will meet again on Monday to decide the next step Mathias Jeanne a CGT official said If the government does not budge we are ready to take it to the end he said CIM also supplies jet fuel to Paris Aeroport which manages the three main airports in the French capital Roissy Orly and Le Bourget A spokesman said on Thursday that Paris Aeroport still had stocks to last another week The strike by oil sector CGT workers has led to refinery shut downs blockade of fuel depots fuel supply disruption and a backlog of several dozen oil tankers at the two main French oil ports at Le Havre and Fos Lavera French oil and gas company Total PA TOTF said on Friday that four of its five refineries in France had been completely shut down due to the strike Defrense said Total s management has ordered non striking workers at its Normandy refinery to reopen some pipes to allow products to flow to depots in the Paris region that had just two more days of stock left Total could not be reached for comment Total Europe s largest refiner said earlier that its fifth refinery the 153 000 barrel per day La Mede in the south of France was still running at reduced output capacity It added that fuel supply disruption was easing slightly with some 659 of its petrol stations in France partially or completely out of fuel compared with 784 the previous day Total controls 2 200 of France s 11 500 petrol stations French riot police removed picketers and barricades blocking access to a large fuel distribution depot near the Donges oil refinery in western France as President Francois Hollande warned anti reform protesters on Friday he would not let them strangle the economy |
MRO | Phillips 66 Partners PSXP Q4 Earnings Sales Top Estimates | Phillips 66 NYSE PSX Partners LP s NYSE PSXP fourth quarter 2019 earnings per unit came in at 1 06 which beat the Zacks Consensus Estimate of 99 cents owing to increased volumes on the partnership s terminals and a full quarter contribution from the isomerization unit at the Lake Charles Refinery However earnings deteriorated from the year ago quarter s figure of 1 09 due to higher expenses Revenues of 432 million rose from 393 million in the year ago quarter and also beat the Zacks Consensus Estimate of 419 million The upside can be attributed to higher volumes and average realizations Operating InformationThe partnership provides services through Pipelines Terminals and Storage as well as Processing Other activities Pipeline In fourth quarter 2019 the partnership generated revenues of 126 million up from 118 million in the prior year quarter The uptick was led by higher average pipeline revenues of 67 cents per barrel compared with 61 cents per barrel in the year ago quarter Terminals The partnership generated 47 million up 43 million from the year ago quarter The upside came on the back of higher throughput volumes of refined petroleum products Storage Processing Other activities Through these activities the partnership generated revenues of 118 million up from 109 million in the year ago quarter Operating and Maintenance ExpensesIn the December quarter of 2019 the partnership reported operating and maintenance expenses of 90 million up from 88 million in the year ago quarter Balance SheetAs of Dec 31 2019 the partnership recorded cash and cash equivalents of 286 million Also total debt at the end of the quarter under review was 3 516 million Phillips 66 Partners LP Price Consensus and EPS Surprise Strategic Update OutlookPhillips 66 Partners has various ongoing projects that are backed by long term volume commitments and expected to deliver typical midstream returns Gray Oak pipeline is operating in sync with expectations and expected to reach full service in the second quarter of 2020 It commenced initial operations on the 900 000 barrels per day BPD It will transport crude oil from the Permian and Eagle Ford to Texas Gulf Coast destinations Phillips 66 Partners has a 42 25 ownership in the pipeline Sweeny to Pasadena capacity expansion project will add 80 000 BPD of pipeline capacity providing additional naphtha offtake from the Sweeny fractionators In addition product storage capacity will increase by 300 000 barrels at the Pasadena Terminal The project is expected to start by second quarter 2020 South Texas Gateway Terminal in which Phillips 66 Partners owns a 25 interest is expected to be completed by third quarter 2020 The marine export terminal will have two deep water docks with storage capacity of 8 5 million barrels and up to 800 000 BPD of throughput capacity Clemens Caverns storage capacity expansion from 9 million barrels to 16 5 million barrels is expected to be completed in fourth quarter 2020 while C2G Pipeline which is a 16 inch ethane pipeline that will connect Clemens Caverns to petrochemical facilities in Gregory Texas near Corpus Christi The unit is likely to commence operations by mid 2021 The partnership has earmarked total capex of 867 million for 2020 which includes 734 million for growth projects and 133 million of maintenance capital It expects to exit 2020 with EBITDA run rate of 1 5 billion Zacks Rank Stocks to ConsiderPhillips 66 Partners currently carries a Zacks Rank 3 Hold Few better ranked players in the energy space are California Resources Corporation NYSE CRC Suncor Energy NYSE SU and Marathon Oil Corporation NYSE MRO All the stocks carry a Zacks Rank 2 Buy You can see California Resources Corporation has trailing four quarter positive earnings surprise of 711 1 on average The company s earnings beat the Zacks Consensus Estimate in three of the last four quarters Suncor Energy has trailing four quarter positive earnings surprise of 2 2 on average The company s earnings beat the consensus mark in two of the last four quarters Marathon Oil Corporation has trailing four quarter positive earnings surprise of 197 8 on average The company s earnings beat the consensus mark in all of the last four quarters 7 Best Stocks for the Next 30 DaysJust released Experts distill 7 elite stocks from the current list of 220 Zacks Rank 1 Strong Buys They deem these tickers Most Likely for Early Price Pops Since 1988 the full list has beaten the market more than 2X over with an average gain of 24 7 per year So be sure to give these hand picked 7 your immediate attention |
XOM | As Iraq repays debt Lukoil pledges to unlock investment | By Dmitry Zhdannikov VIENNA Reuters Iraq has positively surprised oil majors by starting quickly to repay accumulated debts the head of Russia s Lukoil said pledging more investment to allow OPEC s second largest producer to maintain stellar output growth Iraq has become the world s fastest growing oil producer with output up 50 percent since it signed contracts worth tens of billions of dollars with the likes of Lukoil BP LON BP Exxon Mobil NYSE XOM and Royal Dutch Shell LON RDSa at the end of the last decade to help develop its huge oilfields But growth in production to around 4 5 million barrels per day bpd has lagged initial plans as oil majors have repeatedly complained about red tape poor security and rising debts Debt repayment to majors for their investments has slowed even further over the past two years as oil prices collapsed but Vagit Alekperov the chief executive and a major shareholder of Lukoil said the situation was changing Iraq is very actively repaying the operators The situation has changed dramatically Alekperov told Reuters in an interview on the sidelines of an OPEC meeting in Vienna where he met several of the organization s ministers and officials Hit by low oil prices Iraq is expected to have a financing gap of 17 billion this year unless it can secure more funding according to the International Monetary Fund The cost of fighting Islamic State militants is another burden In May Iraq reached a 5 4 billion standby agreement with the IMF that could unlock 15 billion more in international assistance over the next three years We know about the IMF talks and we know that the IMF makes it conditional for Iraq to pay back the contractors Alekperov said We hope they pay back all debts by November so we can start a new investment cycle before the end of the year Our long term Iraqi production goal remains intact 1 2 million barrels per day Iraqi fields have huge potential Lukoil is producing 0 4 million bpd in Iraq and if it did triple output at the West Qurna field the country would be able to produce more than 5 million bpd Only Russia Saudi Arabia and the United States produce more oil more than 10 million bpd each Iraq ultimately hopes to close the gap and extract as much as 8 million bpd from its huge reserves the world s fifth largest after Venezuela Saudi Arabia Canada and Iran DRILLING FRENZY Alekperov said he hoped Tehran would reveal details of new exploration contracts with majors which have been waiting for them for over two years before the end of 2016 to spur investment He said Lukoil was ready to invest billions Elsewhere he said he was waiting for Mexico to tender contracts for developing its offshore and heavy oil deposits Alekperov said he expected production to rise further in countries such as Saudi Arabia Iran and Iraq while poorer OPEC members with higher production costs would struggle due to their more difficult economic situation Neither Nigeria nor Venezuela are capable of raising production at the moment he said The collapse in oil prices has led to a huge drop in investment across the world amounting to 300 billion last year and 100 billion in the first quarter of this year alone according to Alekperov The consequences will be big A spike in prices in the future could be very significant In Russia where companies have benefited from a rouble depreciation following the fall in oil prices Lukoil wants to raise drilling volumes by as much as 25 35 percent this year to keep output steady Alekperov expects most other Russian companies to do the same to compensate for declining output at mature fields in Western Siberia Lukoil has also expressed interest in buying smaller rival Bashneft The government wants to sell the firm to plug budget holes in a rare privatization move by the Kremlin which spent the past 15 years raising state control in the oil industry We haven t done any bidding yet We haven t seen any documents on Bashneft that we can study What matters to us is good economics not production volumes
Executing the sale in a transparent and open manner with banks coordinating the process is key for the government to send a strong message to investors Alekperov said It would signal a new era for the development of the private sector in Russia |
CSCO | Cisco Finds A Storage Partner In Israel Invests In Elastifile | Cisco Systems Inc NASDAQ CSCO has a made a strategic investment of 15 million in Israeli all flash storage software developer Elastifile The Herzliya based startup has developed an all flash software defined storage SDS solution that offers cloud scale capacity to large and mid size enterprises Per Elastifile this technology can expand through thousands of physical nodes and provide millions of input output Operations per Second IOPS with latency of under 2 milliseconds It supports VMware vSphere OpenStack KVM and Linux containers It appears that Elastifile s success so far is good enough to lure a computer communications giant like Cisco According to Amir Aharoni CEO and co founder of Elastifile Cisco s investment underscores how well Elastifile has done in redefining software defined storage making it capable of providing enterprise grade performance at cloud scale CISCO SYSTEMS Price How is Cisco Poised to Gain The deal is undoubtedly a step up for Cisco to gain a stronghold in cloud It appears that the company has well understood that SDS and SDN are going to shape the future of cloud computing It seems that with this investment Cisco is eyeing the development of object storage and flash storage solutions that will give it an early advantage in the storage industry Benefits for ElastifileThe deal appears to be more than just an opportunity to work with the world s largest IT networking provider The company plans to use the additional funds to aggressively market its new technology the adoption of which will enable customers to deploy more applications on flash Currently Cisco is a Zacks Rank 3 Hold stock Some better ranked stocks in the wider technology sector include CommVault Systems Inc NASDAQ CVLT Netgear Inc NASDAQ NTGR and Radcom Ltd NASDAQ RDCM each sporting a Zacks Rank 1 Strong Buy |
MRO | Norway s Aker BP switching gears from M A to exploration | By Nerijus Adomaitis OSLO Reuters Norwegian oil and gas company Aker BP LON BP is switching emphasis from M A towards exploration taking a potentially riskier path to increase its resources after years when it has relied on acquisitions to add the bulk of its new barrels The company said the change of tack was prompted by falling exploration costs partly as a result of new technologies as well as the rising cost of acquisitions in the energy sector because of stronger oil prices Back in 2015 2016 we acquired resources for 50 60 70 cents a barrel which is really hard to drill out on the Norwegian continental shelf CEO Karl Johnny Hersvik told Reuters in an interview Now when the drilling and the seismic data acquisition cost have come down and the acquisition costs of the equivalent contingent resources have gone up it makes sense to explore Aker BP has added three times more barrels in oil and gas resources through acquisitions than it has found itself since the company was born about three years ago Reuters calculations show The company said it could still make acquisitions if opportunities arose but declined to make any projections on how many barrels it could buy Acquisitions inorganic growth contributed more than 500 million barrels of oil equivalent boe in resources in 2016 18 according to the calculations based on the company s annual reserve reports and investor presentations Aker BP s own exploration efforts during that period were far smaller the firm added 148 million boe from discoveries 83 million in 2016 10 million in 2017 and 55 million last year It cost 1 1 a barrel after tax to find new resources last year The company controlled by Norwegian billionaire Kjell Inge Roekke and 30 percent owned by BP said in January it was hiking its exploration budget by 40 percent year on year to a record 500 million in 2019 and planned to drill 15 exploration wells It aims to find around 100 million boe net in 2019 20 Its sharpened focus on exploration is to some extent emblematic of a wider industry trend of companies beginning to step up drilling efforts which were curbed after the 2014 market crash as a result of technological advances and stronger oil prices It could however be a riskier path for Aker BP whose rapid growth driven largely by M A helped it weather the downturn better than many peers and has seen its share price more than triple since 2016 The company which is solely focused on the Norwegian continental shelf has had a mixed exploration record It found a quarter of all new resources on the shelf in 2016 but the following year was disappointing We have drilled too many dry wells Aker BP s exploration chief Evy Gloerstad Clark told Reuters If we want to get to the top we need to get a better exploration processes in place But Aker BP and other firms including Sweden s Lundin Petroleum Norway s largest firm Equinor are facing a similar challenge discoveries on the Norwegian continental shelf are getting smaller and smaller INDUSTRY CHANGE Aker BP s strategy during the downturn contrasted with that of its closest rival on the continental shelf fellow mid tier player Lundin which stuck to a plan of organic growth via exploration Lundin added only 21 5 million boe from discoveries in 2016 2018 its investor presentations showed Lundin s share price growth has lagged Aker BP s but the stock has still doubled since 2016 bolstered by reserve revisions at the giant Johan Sverdrup field which the firm found in 2010 and is due to start producing this year Aker BP s exploration push reflects a sector wide change in investor sentiment according to Teodor Sveen Nilsen at Sparebank 1 Markets With the upturn in the cycle investors are more focusing on exploration and reserve replacement than a few years ago when all the focus was on return on capital and dividends French oil company Total is launching its biggest exploration drive for years in 2019 for example while Chinese oil majors are also stepping up drilling NEW PROSPECTS Aker BP s CEO Hersvik said a lesson from past exploration failures was not to put all bets on one or two areas and to do better homework to pinpoint the best spots to drill The company said it would spend about 40 percent of its exploration budget targeting new prospects while 60 percent will go to drill near its existing hubs Gloerstad Clark also said Aker BP was working to better visualize its drilling and seismic data using specialized software but this was taking time The Norwegian continental shelf is proving an increasingly challenging environment for explorers In 2011 2017 discoveries averaged under 10 million boe compared with about 110 million boe in the early years of Norway s oil industry in 1966 1980 Aker BP started out in 2016 when Norwegian oil firm Det norske bought British major BP s Norway business in an all share deal with BP taking a 30 percent stake two years after Det norske acquired the Norwegian assets of Marathon Oil NYSE MRO As a result of these and subsequent deals including the acquisition of Hess Norwegian assets in 2017 Aker BP s contingent resources proven resources that could be tapped tripled to 946 million boe between 2016 and 2018 The company has also amassed a large acreage to explore with stakes in 156 production licenses Jefferies analyst Mark Wilson said Aker BP s shift towards exploration was a logical step in the company s development helped by Norway s favorable tax regime
It s a natural evolution that makes sense but the proof will be in the pudding he added |
XOM | Oil rises as turmoil in Nigeria adds to global supply disruptions | By Henning Gloystein SINGAPORE Reuters Oil prices rose on Friday as turmoil in Nigeria shale bankruptcies in the United States and a crisis in Venezuela all contributed to tightening supplies However brimming inventories across the world were preventing supply shortfalls as well as sharper price spikes traders said International Brent crude futures LCOc1 were trading at 49 02 per barrel at 0653 GMT 0153 EDT up 21 cents or 0 43 percent from their last settlement U S West Texas Intermediate WTI crude futures CLc1 was up 29 cents or 0 6 percent at 48 45 a barrel ANZ bank said that unexpected supply disruptions across the world excluding output falls in the United States amounted to around 2 5 million barrels of daily production virtually erasing a production overhang that had pulled down prices by over 70 percent between 2014 and early 2016 The supply disruptions inflicting the oil market continue to ratchet up As these issues linger we expect an increasing supply risk premium will price into the market the bank said Nigeria s oil production showed further signs of strain on Thursday as intruders blocked access to Exxon Mobil s N XOM terminal exporting Qua Iboe the country s largest crude stream Loading schedules have been interrupted at three of the five primary export terminals in Nigeria due to sabotage with a fourth Qua Iboe interrupted by an operational incident we estimate over 450 000 bpd is affected U S investment bank Jefferies said This means that the militant activity has cut Nigeria s oil output to a more than 22 year low of under 1 4 million bpd Libyan output has also been hit by internal conflict In North America U S crude oil output has fallen 8 79 million barrels per day bpd down from a peak of more than 9 6 million bpd last year as a wave of bankruptcies hits producers In Canada production has also been cut as wildfires forced closures of around 1 million barrels in daily production although output is gradually returning In South America output from OPEC member Venezuela is also stalling as its state owned oil company PDVSA struggles with a cash squeeze amid a deep political and economic crisis Venezuelan crude oil output fell to around 2 53 million bpd in the first quarter of 2016 compared with 2 72 million bpd in the same quarter of last year data from the Organization of the Petroleum Exporting Countries OPEC showed Despite the disruptions oil supplies to customers are not at risk thanks to ongoing high output in the Middle East and Russia and because of high oil inventories across the world including the United States and Asia |
XOM | Crude hovers at 7 month highs amid supply disruptions | Investing com U S oil futures were hovering at seven month highs on Friday as supply disruptions in Nigeria and Libya lent support to the commodity although the strong U S dollar limited gains
U S crude futures for June delivery were up 0 12 at 48 73 a barrel near the previous session s seven month high of 49 04
On the ICE Futures Exchange in London the July Brent contract edged up 0 08 to 48 85 a barrel close to Wednesday s six month high of 49 85
Oil prices strengthed after intruders blocked access on Thursday to Exxon Mobil NYSE XOM s terminal exporting Qua Iboe in Nigeria the country s largest crude stream
Libyan crude output also remained under pressure amid internal conflict
Elsewhere Canadian oil production was also said to have been cut as wildfires forced closures of around 1 million barrels in daily production
But gains in oil prices were expected to remain limited as demand for the U S dollar remained strong after the Federal Reserve s April meeting minutes on Wednesday showed that officials said a June rate hike would be appropriate if economic data indicated that growth was picking up in the second quarter and employment and inflation were firming
In addition New York Federal Reserve President William Dudley said on Thursday that the U S economy could be strong enough to warrant a rate hike in June or July
The U S dollar index which measures the greenback s strength against a trade weighted basket of six major currencies was steady at 95 31 just off Thursday s seven week peak of 95 51 |
XOM | French oil and port workers vote to begin new strikes | PARIS Reuters Oil sector workers of French CGT and FO unions voted on Monday to begin a strike at Exxon NYSE XOM Mobil s 240 000 barrels per day Port Jerome refinery in northern France the unions said in a joint statement Workers at a port terminal in Le Havre northern France which handles large volumes of imported petroleum products also voted overwhelmingly to strike the CGT said The Port Jerome workers will join the rolling nationwide protest that began in March aimed at forcing the government to withdraw contested labor market reforms The unions said the strike and blockade of the refinery will begin at 0400 GMT on Tuesday
A spokeswoman for Exxon told Reuters earlier on Monday that production had not been affected by the strike which has hit output at rival Total s refineries |
XOM | Debt repayments in crude cripple poorer oil producers | By Libby George and Dmitry Zhdannikov
LONDON Reuters Poorer oil producing countries which took out loans to be repaid in oil when the price was higher are having to send three times as much to respect repayment schedules now prices have fallen
This has crippled the finances of countries such as Angola Venezuela Nigeria and Iraq and created a further division within the Organization of the Petroleum Exporting Countries
Ahead of an OPEC meeting next week poorer members have continued to push for output cuts to lift prices but wealthier Gulf Arab members such as Saudi Arabia which are free of such debts are resisting taking any action despite prices falling 60 percent in the past 2 years
Angola Africa s largest oil producer has borrowed as much as 25 billion from China since 2010 including about 5 billion last December forcing its state oil firm to channel almost its entire oil output toward debt repayments this year
This year Angola Nigeria Iraq Venezuela and Kurdistan are due to repay a total of between 30 billion and 50 billion with oil according to Reuters calculations based on publicly disclosed information and details given by participants in ongoing restructuring talks
Repaying 50 billion required only slightly over 1 million barrels per day bpd of oil exports when it was trading at 120 per barrel but with prices of around 40 the same repayment would require exports of over 3 million bpd
All of those oil nations Angola Nigeria Venezuela have taken money for survival but haven t got any money left for investments That is very damaging to their long term growth prospects said Amrita Sen from Energy Aspects think tank
People tend to look at current production volumes but if you have committed your entire production to China or other buyers under loans then you cannot invest to keep growing and won t benefit from higher prices in the future
China has also become Venezuela s top financier via an oil for loans program which since 2007 has funneled 50 billion into Venezuelan coffers in exchange for repayment in crude and fuel including a 5 billion deal last September
While details of the loans have not been made public analysts from Barclays LON BARC estimate Caracas owes 7 billion to Beijing this year and needs nearly 800 000 bpd to meet payments up from 230 000 bpd when oil traded at 100 per barrel
Last week Venezuela said it had reached a deal with China to improve the terms of loans giving its economy oxygen It did not disclose the new terms
Nigeria and Iraq also owe billions of dollars repayable in oil to companies such as Shell L RDSa and Exxon Mobil N XOM according to national oil firms and industry sources
Iraq is trying to renegotiate contracts for investment and development of new oil fields that it has with companies including Exxon Shell and Lukoil It was supposed to repay the companies 23 billion this year with oil but is now arguing that it will only have enough crude to repay 9 billion
Nigeria owes 3 billion this year in oil repayments to big oil companies which have helped the country fund its share of joint oil field development
Iraq s semi autonomous region of Kurdistan has leveraged all its oil production worth 3 billion to trading houses Vitol and Petraco as well as to Turkey to fund a fight against Islamic State according to its natural resources minister
Ecuador one of OPEC s smallest member countries borrowed up to 8 billion from Chinese and Thai firms repayable with oil between 2009 and 2015 according to the national oil company
SUPPLY DISRUPTIONS
In contrast OPEC s Gulf Arab members Saudi Arabia the United Arab Emirates Kuwait and Qatar have very few joint ventures with oil companies do not have pre payment deals with China and do not need to borrow from trading houses
While Saudi Arabia saw every dollar from its oil sales going to state coffers the poorer members had a large part of their oil revenue eaten up by debts leaving no money to invest in infrastructure and field development
As a result Nigeria and Venezuela are now facing steep production declines at a time when Saudi Arabia is preparing to further ramp up supplies as it invested heavily in new fields
This helps to explain why Saudi Arabia is resisting a global deal to reduce output because the lack of debt means it is able to use the money for development and reinforce its dominant position in oil markets
Nigeria and Venezuela meanwhile are desperate for a deal that would reduce output and push up prices to help them invest in oil fields and repay fewer barrels to creditors It may ultimately be mounting supply disruptions in stressed states rather than collective cartel action that causes an accelerated market rebalancing RBC Capital s head of commodity strategy Helima Croft said |
XOM | French police break up refinery blockade in anti reform showdown | By Marc Leras and Brian Love
MARSEILLE PARIS Reuters French riot police broke up a strike picket at an oil refinery near the southern port of Marseille on Tuesday in a government versus union showdown over unpopular labour law reforms
Police fired tear gas and water canon at protesters outside Exxon Mobil NYSE XOM Corp s Fos Sur Mer refinery and terminal after scores of fuel stations ran dry and the government warned the CGT its industrial action would not be tolerated
Enough is enough said Prime Minister Manuel Valls
The pre dawn operation marked an escalation in a standoff between President Francois Hollande and opponents of the planned labour reforms which have triggered weeks of street protests and may paralyse the country with rolling strikes at refineries ports and railways planned
The CGT says the reform will unravel France s protective labour regulations allowing firms to lay off staff more easily in hard economic times and by providing further exemptions from national rules on pay and working conditions
We ll see this through to the finish to withdrawal of the labour law said CGT leader boss Philippe Martinez This is a government which has turned its back on its promises and we are now seeing the consequences
Transport Minister Alain Vidalies said one in every five of the country s 12 500 petrol stations were either completely dry or out of one type of fuel a week after oil workers first went on strike
FUEL SHORTAGES
The long lines of motorists panic buying gasoline amid fuel rationing in parts of France will compound the troubles Hollande France s most unpopular leader in recent memory who is striving to convince voters that things are getting better a year ahead of presidential elections
Hollande says the labour reform is critical to create new jobs and has vowed he will only run for a second term if he can bring the jobless rate down from around 10 percent
Exxon Mobil said production at its two French refineries was at normal levels after a limited number of employees joined the strike action However damage to the road and terminal tracks at Fos Sur Mer meant trucks could not load
Total S A said some of its refineries were at standstill while others were operating at reduced capacity The oil major added that of its 2 200 petrol stations more than 100 had run dry and more than 500 others were running low
Emergency stocks are sufficient to keep the country s fuel stations in operation for up to two months according to some experts if the government chose to tap into those supplies But Valls had already warned that the pickets would not be tolerated for long
The labour reform dispute has shone a spotlight on the battle for influence within the CGT once France s biggest trade union group but an organisation whose power has shown signs of waning
The CGT has also called weekly strikes on the SNCF state railways and an open ended strike on the Paris underground and suburban commuter train networks from June 2 a week before the Euro 2016 soccer tournament opens |
XOM | Strikes protests notwithstanding IMF prods France to reform | By Leigh Thomas PARIS Reuters France s economy is not recovering quickly enough to cut unemployment and debt significantly and will not do so without further reforms the International Monetary Fund said on Tuesday despite slightly raising its growth estimates Yet deeper reforms won t be easy The IMF s warning came as President Francois Hollande s government squared off with unions carrying out refinery port and rail strikes over plans to ease protective labor regulations and make hiring and firing easier The French economy is set to grow close to 1 5 percent this year and 1 75 percent on average in the coming five years the IMF said in the preliminary findings of an annual review of France Previously the institution had forecast 1 1 percent growth this year and 1 3 percent next year The more optimistic outlook lends some credence to the government s own forecasts for growth of 1 5 percent this year and next which many economists say is the bare minimum necessary to get unemployment falling The bottom line is that the pace of growth that we project for the medium term will not lead to a very fast reduction in unemployment or debt IMF France mission chief Christian Mumssen told reporters Less than a year away from a presidential election in which Hollande has yet to say whether he will run the Socialist government is banking on business friendly reforms to the labor market to stimulate job growth and bring down unemployment currently stuck at about 10 percent Those reforms which the government forced through the lower house of parliament without a vote to dodge a rebellion have infuriated trade unions and driven a wedge through the ruling Socialist Party On Tuesday riot police fired tear gas and water canon to break through a picket line outside an Exxon Mobil Corp N XOM oil complex and at least five refineries nationwide were either shut down or in the process of halting operations as scores of fuel stations across the country ran dry There is no petrol anywhere said one motorist who had queued for two hours I feel upset because we seem to be have been taken hostage by this strike which has quickly spread So yes I am upset But then I understand I understand why they must go on strike and why we must respect it Hollande has staked his bid for a second term on his ability to drive unemployment lower The IMF said job creation would nonetheless lag growth unless the government did even more to overhaul the labor market than now proposed It recommended in particular tightening rules for receiving unemployment benefits a move which would likely be a red flag for unions DEBT Turning to government finances the IMF said a recent improvement came from recovering growth and falling interest rates rather than reduced spending Without a greater effort France s reduction in the public deficit will be just barely in line with its target of three percent of economic output next year the IMF said It estimated debt would peak at 98 percent of gross domestic product in 2017 It also recommended streamlining France s vast civil service and keeping wage growth in check after the government agreed to a two step salary increase early this year following a six year freeze Meanwhile social spending would be a ripe source of savings it said especially if benefits were increasingly handed out based on need
Further savings could be found by raising the retirement age and reining in health spending |
XOM | Strikes cripple French oil refineries disrupt shipping | By Bate Felix and Amanda Cooper PARIS LONDON Reuters Strikes by French oil sector workers protesting proposed labor reforms spread to all the country s refineries on Tuesday sapping petrol stations dry and creating delays for tankers at major ports France has been hit by a wave of strikes over the past week aimed at forcing President Francois Hollande s socialist government to withdraw proposed new labor market rules Striking workers have blocked fuel depots and oil terminals disrupting distribution of gasoline and other refined products By Tuesday a quarter of the country s network of 11 500 petrol stations had run dry prompting Prime Minister Manuel Valls to declare Enough is enough France is western Europe s third biggest oil refiner behind Germany and Italy according to the JODI World Oil Database with a total refining capacity of nearly 1 5 million barrels a day of oil equal to around 1 5 percent of global daily crude demand The impact on the oil price has been limited so far though the strikes have curbed demand from refineries Brent crude was up nearly 1 percent on Tuesday at 48 73 a barrel on expectations that data would show a U S supply overhang was shrinking But with just a couple of weeks to go before the kick off of the Euro 2016 soccer tournament in France which is expected to attract more than a million foreign visitors the government is under pressure to act quickly to free up flows of crude oil and refined products The European football championship starts on June 10 in France and we don t think that the government will allow for all retail stations to be empty for that event There will therefore likely be an import pull for diesel cargoes during June and July Petromatrix oil strategist Olivier Jakob said A prolonged refinery strike in France in 2010 led to a glut of crude in Europe because it could not be delivered to refineries and a spike in refined products prices due to low output from refineries Refining margins for diesel fuel have already risen 15 percent in the space of a week to their highest level since November That is a potentially unwelcome development for drivers in France who like car owners around the world have enjoyed a long period of cheap fuel SHIPPING OUT Traders and shipping sources said queues of tankers had formed off the port of Le Havre in northern France which services Total s 247 000 bpd Gonfreville plant the country s biggest refinery as well as Exxon s 240 000 bpd Port Jerome facility At Fos in the south where Exxon NYSE XOM runs a 140 000 bpd refinery protesters caused damage to the road and railway running to the plant and the company said it was unable to load any products onto distribution trucks The strike at the port of Le Havre will limit the intake of cargoes and might cause some cargoes to stay afloat but once the strikes are over there should be some supportive impact on the cargo market as inland stocks will need to be rebuilt something that will also be the case if strategic stocks are released Petromatrix s Jakob said Crude oil traders said there were no signs yet of distress in the market of cargoes being diverted to other ports or of owners of physical barrels being forced to sell at steep discounts just to get rid of their oil Still traders said it was probably just a matter of time before charges on ships for late arrival at destination ports or demurrage start to rise and owners of physical cargoes may have to fight harder to find buyers for their oil The flip side for the oil market at least is that with French refineries either shut or running at minimum levels an overhang of excess refined products in Europe is likely to clear up more quickly
The combination of upstream production outages and French strikes are going to clean up a bit of the overhang in both crude and products But it will depend on how long either last one trader said |
MRO | Can Marathon Oil MRO Run Higher On Rising Earnings Estimates | Marathon Oil MRO could be a solid choice for investors given the company s remarkably improving earnings outlook While the stock has been a strong performer lately this trend might continue since analysts are still raising their earnings estimates for the company
The upward trend in estimate revisions for this energy company reflects growing optimism of analysts on its earnings prospects which should get reflected in its stock price After all empirical research shows a strong correlation between trends in earnings estimate revisions and near term stock price movements Our stock rating tool the Zacks Rank is principally built on this insight
The five grade Zacks Rank system which ranges from a Zacks Rank 1 Strong Buy to a Zacks Rank 5 Strong Sell has an impressive externally audited track record of outperformance with Zacks 1 Ranked stocks generating an average annual return of 25 since 2008
For Marathon Oil there has been strong agreement among the covering analysts in raising earnings estimates which has helped push consensus estimates considerably higher for the next quarter and full year
The chart below shows the evolution of forward 12 month Zacks Consensus EPS estimate
12 Month EPS
Current Quarter Estimate Revisions
The company is expected to earn 0 08 per share for the current quarter which represents a year over year change of 46 67
The Zacks Consensus Estimate for Marathon Oil has increased 26 67 over the last 30 days as three estimates have gone higher compared to no negative revisions
Current Year Estimate Revisions
For the full year the company is expected to earn 0 71 per share representing a year over year change of 0
The revisions trend for the current year also appears quite promising for Marathon Oil with three estimates moving higher over the past month compared to no negative revisions The consensus estimate has also received a boost over this time frame increasing 26 65
Favorable Zacks Rank
Thanks to promising estimate revisions Marathon Oil currently carries a Zacks Rank 2 Buy The Zacks Rank is a tried and tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision You can see the complete list of today s Zacks 1 Rank Strong Buy stocks here
Our research shows that stocks with Zacks Rank 1 Strong Buy and 2 Buy significantly outperform the S P 500
Bottom Line
Marathon Oil shares have added 9 5 over the past four weeks suggesting that investors are betting on its impressive estimate revisions So you may consider adding it to your portfolio right away to benefit from its earnings growth prospects |
MRO | Marathon Oil MRO Stock Sinks As Market Gains What You Should Know | In the latest trading session Marathon Oil MRO closed at 13 24 marking a 0 3 move from the previous day This change lagged the S P 500 s daily gain of 0 19 Meanwhile the Dow gained 0 31 and the Nasdaq a tech heavy index added 0 08
Coming into today shares of the energy company had lost 0 67 in the past month In that same time the Oils Energy sector gained 4 35 while the S P 500 gained 3 72
MRO will be looking to display strength as it nears its next earnings release The company is expected to report EPS of 0 08 down 46 67 from the prior year quarter Meanwhile the Zacks Consensus Estimate for revenue is projecting net sales of 1 27 billion down 28 32 from the year ago period
It is also important to note the recent changes to analyst estimates for MRO These revisions help to show the ever changing nature of near term business trends As such positive estimate revisions reflect analyst optimism about the company s business and profitability
Based on our research we believe these estimate revisions are directly related to near team stock moves To benefit from this we have developed the Zacks Rank a proprietary model which takes these estimate changes into account and provides an actionable rating system
The Zacks Rank system which ranges from 1 Strong Buy to 5 Strong Sell has an impressive outside audited track record of outperformance with 1 stocks generating an average annual return of 25 since 1988 Over the past month the Zacks Consensus EPS estimate has moved 29 57 higher MRO currently has a Zacks Rank of 2 Buy
Investors should also note MRO s current valuation metrics including its Forward P E ratio of 41 66 This valuation marks a premium compared to its industry s average Forward P E of 19 6
Also we should mention that MRO has a PEG ratio of 5 36 The PEG ratio is similar to the widely used P E ratio but this metric also takes the company s expected earnings growth rate into account The Oil and Gas Integrated United States industry currently had an average PEG ratio of 3 24 as of yesterday s close
The Oil and Gas Integrated United States industry is part of the Oils Energy sector This industry currently has a Zacks Industry Rank of 30 which puts it in the top 12 of all 250 industries
The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors Our research shows that the top 50 rated industries outperform the bottom half by a factor of 2 to 1
Make sure to utilize Zacks Com to follow all of these stock moving metrics and more in the coming trading sessions |
MRO | Marathon Oil MRO Gains But Lags Market What You Should Know | In the latest trading session Marathon Oil MRO closed at 11 77 marking a 0 68 move from the previous day The stock lagged the S P 500 s daily gain of 1 01 Elsewhere the Dow gained 0 66 while the tech heavy Nasdaq added 1 43
Heading into today shares of the energy company had lost 12 89 over the past month lagging the Oils Energy sector s loss of 5 65 and the S P 500 s gain of 0 19 in that time
Wall Street will be looking for positivity from MRO as it approaches its next earnings report date This is expected to be February 12 2020 The company is expected to report EPS of 0 08 down 46 67 from the prior year quarter Our most recent consensus estimate is calling for quarterly revenue of 1 27 billion down 28 19 from the year ago period
Investors might also notice recent changes to analyst estimates for MRO These recent revisions tend to reflect the evolving nature of short term business trends As a result we can interpret positive estimate revisions as a good sign for the company s business outlook
Based on our research we believe these estimate revisions are directly related to near team stock moves We developed the Zacks Rank to capitalize on this phenomenon Our system takes these estimate changes into account and delivers a clear actionable rating model
The Zacks Rank system which ranges from 1 Strong Buy to 5 Strong Sell has an impressive outside audited track record of outperformance with 1 stocks generating an average annual return of 25 since 1988 Within the past 30 days our consensus EPS projection has moved 105 03 higher MRO is holding a Zacks Rank of 2 Buy right now
Digging into valuation MRO currently has a Forward P E ratio of 22 21 Its industry sports an average Forward P E of 16 99 so we one might conclude that MRO is trading at a premium comparatively
We can also see that MRO currently has a PEG ratio of 2 86 The PEG ratio is similar to the widely used P E ratio but this metric also takes the company s expected earnings growth rate into account The Oil and Gas Integrated United States was holding an average PEG ratio of 2 28 at yesterday s closing price
The Oil and Gas Integrated United States industry is part of the Oils Energy sector This group has a Zacks Industry Rank of 62 putting it in the top 25 of all 250 industries
The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors Our research shows that the top 50 rated industries outperform the bottom half by a factor of 2 to 1
To follow MRO in the coming trading sessions be sure to utilize Zacks com |
CSCO | Cisco Loses Leading Engineers After Management Shakeup | Top Cisco Systems Inc NASDAQ CSCO executives reportedly resigned showing discontent over their changed roles under a recent reorganization Mario Mazzola Prem Jain Luca Cafiero and Soni Jiandani dubbed as MPLS after initials of their first names and often referred as the heart soul and brains of Cisco are legendary engineers who have created some of Cisco s most successful products The Wall Street Journal WSJ reported on Monday that they will leave Cisco effective Jun 17 The journal cited an internal memo that said that the executives decision to leave is based on a disconnect regarding roles responsibilities and charter that came to light immediately after the announcement All four were holding the title of senior vice president However as part of a management shake up last week Cisco altered the roles of Mazzola Cafiero and Jain naming them as advisors to the company Jiandani s title is however unchanged after the reorganization Business Insider previously reported that there were some tensions growing inside Cisco as employees complained about the big financial rewards MPLS team members were receiving So the decision to relegate them to advisory roles might be an effort to reduce these tensions MPLS was once the most trusted engineering team under ex CEO John Chambers As a part of Cisco s spin in effort Chambers spent billions of dollars on them and their teams Spin in was a special arrangement that Cisco had with this group of engineers wherein they headed startups funded by the company to develop new technologies that Cisco subsequently bought back at pre determined rates Over the years MPLS led startups were funded three times and later purchased by Cisco Currently Cisco is a Zacks Rank 3 Hold stock Some better ranked stocks include Extreme Networks Inc NASDAQ EXTR Netgear Inc NASDAQ NTGR and Radcom Ltd NASDAQ RDCM each sporting a Zacks Rank 1 Strong Buy |
CSCO | Is Cisco Systems CSCO Stock A Solid Choice Right Now | One stock that might be an intriguing choice for investors right now is Cisco Systems Inc NASDAQ CSCO This is because this security in the Computer Networks space is seeing solid earnings estimate revision activity and is in great company from a Zacks Industry Rank perspective This is important because often times a rising tide will lift all boats in an industry as there can be broad trends taking place in a segment that are boosting securities across the board This is arguably taking place in the Computer Networks space as it currently has a Zacks Industry Rank of 46 out of more than 250 industries suggesting it is well positioned from this perspective especially when compared to other segments out there Meanwhile Cisco Systems is actually looking pretty good on its own too The firm has seen solid earnings estimate revision activity over the past month suggesting analysts are becoming a bit more bullish on the firm s prospects in both the short and long term CISCO SYSTEMS Price and Consensus In fact over the past month current quarter estimates have risen from 53 cents share to 55 cents share while current year estimates have risen from 2 11 share to 2 13 share The company currently carries a Zacks Rank 3 Hold which is also a favorable signal So if you are looking for a decent pick in a strong industry consider Cisco Systems Not only is its industry currently in the top third but it is seeing solid estimate revisions as of late suggesting it could be a very interesting choice for investors seeking a name in this great industry segment Want the latest recommendations from Zacks Investment Research Today you can download 7 Best Stocks for the Next 30 Days |
XOM | Corn Trades Lower Oil May Be Poised For Rally | With debt piling up at a record pace Exxon Mobil NYSE XOM is losing the Triple A credit rating it has held since 1985 The record date of 35 billion versus 2 billion in 2012 shows that the Saudi s and other OPEC and non OPEC nations are pumping an economic catastrophe
Moving to the corn front the first day of spring hardly feels like spring at all The weather forecasted this week in the lower 48 looks like old man winter is hanging around for a while In the overnight electronic session May Corn is currently trading at 366 which is of a cent lower The trading range has been 367 to 365 This week s weather should be disruptive for farmers trying to get the fields ready
On the ethanol front there were no trades posted in the overnight electronic session The market is weak with corn and crude oil prices lower The April contract settled at 1 425 and is showing 2 bids at 1 396 and 1 offer at 1 421
On the crude oil front the April contract expires today and we are shifting our focus to the May contract which is currently trading at 4090 which is 24 points lower The trading range has been 4114 to 4041 so far The market may be poised for another rally with Russia withdrawing from Syria which means we could possibly get a deal done on production cuts
On the natural gas front the market is coming in weaker again this morning trading near the lows The April contract is currently trading 1 867 which is 4 cents lower The trading range is 1 908 to 1 857 so far Friday s rig count that was up 1 is adding weakness to this market for now |
XOM | For Saudi Aramco Breaking Up Is Not So Hard To Do | Editor s Note Desktop users After reading the article below please take a few additional minutes to participate in the survey at the end of this post
Saudi Aramco and Royal Dutch Shell NYSE RDSa recently announced plans to end their co ownership of the Motiva refinery in Texas The two energy companies have operated the refining and marketing enterprise as a 50 50 joint venture since 2002 This move is significant because Motiva includes three refineries in the gulf region of the United States with combined capacities of 1 1 million barrels a day The complex is the largest in the United States and one of the 10 largest worldwide
In the divorce Shell will be getting the two smaller refineries with a combined capacity of just under 500 000 barrels a day 9 distribution terminals and the Shell gasoline brand in Florida Louisiana and the Northeast U S Saudi Aramco will keep the Port Arthur Refinery under the Motiva name 26 distribution terminals and an exclusive license to use the Shell gasoline brand in Texas Mississippi the Southeast and Mid Atlantic Significantly the Port Arthur refinery recently completed 10 billion worth of renovations that made it the largest and most updated refinery in the U S
Neither company has much to say about the breakup although management has long been an issue Too many cooks in the kitchen an oil trader familiar with the company commented
On Shell s part the move seems to be motivated by a desire to save cash by simplifying operations After a disastrous foray into offshore drilling in the Arctic that the company cancelled after losing billions of dollars Shell merged with the BG Group LON BG in London Since then Shell has been actively slimming down its operations This month in addition to the Motiva split the company also dropped a major gas project in the UAE Shell seems focused on shoring up its core areas deep water drilling and LNG
In many ways Motiva was a test case for Saudi Aramco as the company has expanded its downstream operations over the past fifteen years Since partnering with Shell on Motiva Saudi Aramco has gone on to undertake joint venture refining enterprises with Sinopec NYSE SHI Total NYSE TOT ExxonMobil NYSE XOM and Hanjin Energy KS 097230 in addition to co ventures with Shell in Saudi Arabia South Korea Japan and China
If management was indeed an issue expect the Saudis to clean house Saudi Aramco is a notoriously well run and managed operation that can be extraordinarily efficient when it wants The Saudis may bring in their own people to manage the operation directly or may rely on local talent Either way Motiva is likely to emerge as a slimmed down operation The real question is what are Aramco s future plans for this major asset
Just as Motiva paved the way for Aramco s expansion into petroleum refining does this move herald future movement away from the joint venture model Aramco may be looking to move from partial to full ownership in countries where this is possible some countries like China prefer that a Chinese company partially own any company that operates in China although there are signs that the Chinese government may be easing up on this policy
If sole ownership of Motiva goes well then buying out their partners while retaining distribution rights in various countries could be Aramco s long term downstream strategy This essentially mirrors the strategy the Saudis took with Aramco s upstream assets in Saudi Arabia The venture began as a wholly American operation in which the Saudis slowly increased their ownership percentage until buying out all remaining American interests in the 1980s A similar strategy for downstream operations would not be surprising
Aramco could also be looking for a new partner to expand its refining operations in the United States A retooled Motiva enterprise could be the right investment for oil companies that have been cutting back on upstream investment or even for an ambitious private equity company Motiva is the largest most up to date refinery in the United States where no new refineries have been built in 30 years Run well Motiva should be well positioned for future profitability
On the other hand Aramco might be looking to divest itself of the entire enterprise American regulations have grown increasingly stringent over the years and Aramco may be more interested in putting its capital into countries with less restrictive environmental and corporate regulations Expanding in regions like China Korea India and even Saudi Arabia would pose less onerous burdens and potentially yield higher profits
Last but certainly not least the move could be a precursor to the eagerly awaited Aramco IPO that was broached at the beginning of 2016 Aramco is unlikely to take its core company public either on the Saudi or American exchanges but has pointed to some of its downstream operations as likely candidates Since the majority of its refining operations are joint ventures taking them public would require complicated negotiations with the foreign companies involved Now with sole ownership of Motiva Aramco has full control over the decision to take the refining enterprise public and over the decision of which market will list the company
Imagine this the largest refinery in America owned and operated by a Saudi company that used to be an American company publicly traded on the Saudi stock market
Reader Survey
As the post above explains Saudi Aramco and Royal Dutch Shell recently decided to end their 50 50 ownership of the Motiva refinery complex in Texas Saudi Aramco will retain ownership of the largest refinery What do you think Saudi Aramco will do should do with Motiva Please respond in the comments section
Retain sole ownership
Look for a new partner
Sell the refinery
IPO the refinery
Other explain in comments |
XOM | The Great Divide Between Oil Bulls And Bears Is Growing | The Great Divide
The great divide between the bulls and the bears in oil is growing as it seems that major players are seeing diametrically opposed views of our oil price future The bears seem to suggest that the recent increase in price was nothing but a short squeeze and nothing has really changed on the fundamentals of oil glut The bulls on the other hand point to a historic cut back in capital spending and supply cuts that may have ramifications on the supply side for decades to come
Merrill Lynch gave a notable bullish call yesterday They pointed to falling U S production as they noted that U S oil production fell 30K bpd last week and is nearly 400 000 barrels per day less than it was a year ago U S production peaked at 9 6 Million barrels a day in May 2015 and is now close to 600 000 barrels a day lower than the high They also point to U S demand that has been surging and they predict any increase in demand that will help sop up excess supply Merril also anticipates that OPEC production will fall as they say that the April 17th meeting will lead to production caps therefore leading them to maintain their view that the bottom in oil is in
Oil bulls also point to the fact that because of the lack of exploration and budget cuts global production capacity is going to decrease Yesterday s article in the Wall Street Journal was an ominous example of that argument They reported that in 2015 the seven biggest publicly traded Western energy companies including Exxon Mobil Corp NYSE XOM and Royal Dutch Shell LON RDSa replaced just 75 of the oil and natural gas they pumped on average That number will actually become even larger this year as we saw another round of capital spending cuts in the month of January which is almost unprecedented in history
Yet yesterday Barclays LON BARC warned that really nothing has changed Despite the fact that commodities all of a sudden are the best performing asset class this year according to Barclays the recent rise in oil and other commodities like copper and iron ore are not being backed by improvement in fundamentals They worry that the whole complex could face a big collapse Barclays said the recent rise is just about investors looking for a hedge against inflation
Today will see if Janet Yellen the Fed Chief wants inflation Recent Fed statements by Fed officials has given the market the sense that they are already turning more hawkish and may regret signaling to the market that there will only be two interest rate increases this year The Fed Chief has been known to be a dove and the market will watch to see if she is going to stay that way Will oil rebound from its overnight weakness If not we ll be prepared for more selling
Crude oil is also worried about another increase in inventory We will see if that worry is real after the close when we get the American Petroleum Institute report
Most readers know my take on the crude oil market I believe that we are at a historic bottom in oil that may hold for a generation The reasons are that every time in history that we have seen this type of retrenchment in spending and exploration we always pay for it in higher prices down the road
As far as OPEC is concerned I believe they have to cut back production mainly because the big cheese in the OPEC cartel otherwise known as Saudi Arabia is losing the production war they started Not only do they have to go out and borrow billions of dollars and sell off part of their state owned oil company they are now losing market share The FT reports that Saudi Arabia lost market share in more than half of the most important countries it sold crude to in the past three years even as the kingdom increased output to record levels
The FT says that The world s biggest oil exporter lost ground to rivals in nine out of 15 top markets between 2013 and 2015 including China South Africa and the US according to an analysis of customs data Saudi Arabia set itself a goal in late 2014 of maintaining its crude market share amid a glut that prompted a collapse in oil prices but the imports data compiled by FGE an energy consultancy suggest the country s strategy suffered setbacks in some of its key customer countries last year Other data show that Saudi Arabia achieved a limited increase in global market share in 2015 compared to 2014 although last year s figure was lower than that recorded in 2013
Gas prices at the pump continue to rise with record demand and refiner reluctance to produce more supply when margins are weak AAA reports that the national average price of gas climbed above 2 00 per gallon last Thursday for the first time in 2016 and average prices have increased for 21 consecutive days The average price of 2 04 per gallon is up six cents per gallon on the week and 30 cents per gallon for the month Despite the recent increase average gas prices remain 39 cents per gallon less than a year ago |
XOM | Yellen Balks Like A Dove Attention Shifts To Oil And Commodity Prices | The Fed obeyed the old folk wisdom saying about March It came in like a Lion and went out like a Lamb Janet Yellen has once again confused financial markets by contradicting everything that she and her compatriots had said the week before about interest rates She suddenly turned dovish Jim Cramer the energetic host of Mad Money quipped She fooled us again or maybe we are just choosing to be fooled
When 2015 closed the Fed s long awaited interest rate normalization process had finally begun They also telegraphed to the market that four more changes were on tap for 2016 sending the dollar into a tizzy and disrupting trading positions across the globe The latest news reveals once more how quickly things can change when a central bank changes its collective mind Forex analysts for banks and hedge funds have been feverishly changing their forecasts for 2016 and tumbling over one another trying to get their new figures published and out the door
The fundamental drivers for price action in 2016 were supposed to be the Fed s normalization process China Europe and the deflationary aspect of commodity prices Concern had already been focused on the latter issue but the press had moved on to berating China after oil prices seemingly formed a bottom and roared back with a rally to beat the band Chinese officials scoffed at reports that its banking system was on the verge of collapse and oil prices retreated Was the rally nothing but short covering
In a blink of an eye the market is transfixed again on oil prices
Oil prices hit the 40 watermark while the Loonie strengthened to the tune of 800 pips Fortunes are made on just such movements but it appears that the rally has fizzled Oil dipped this morning below 37 and the cry on the street is that we are headed for the twenties again Basic fundamentals in the industry have not changed Yes there was a rumor that a few OPEC members were discussing a production freeze or even cutbacks but that notion went nowhere What was all the ruckus about
For whatever the reason inflation targets and our ability to hit them has become like it or not the newly accepted barometer for determining if central banking policy is really producing positive economic results GDP growth has taken a back seat in the bus of economic affairs so to speak Within that context deflation is the outright enemy of mankind although I cannot think of one household that has not reveled in lower prices at the gas pump The above chart attempts to put oil prices and inflation on equal footing
As much as there appears to be a strong correlation at times economists reject the notion out of hand As many state inflation expectations are supposed to revert to a mean average over time the simple idea that a central banker s true objective is to guide the domestic ship of state towards an acceptable inflation target Oil prices are not supposed to revert to a mean They are guided by supply and demand forces in the market as well as by inflation and the strength of the U S dollar The conclusion that inflation expectations are rising and pulling oil prices up by their bootstraps is illusory There have to be other reasons for the recent rally and pullback
There have not been definitive improvements in oilrig counts storage facility inventories production deliveries or even gasoline usage to justify this recent rally In cases like these the logical culprits are typically general perceptions and the emotional responses that follow A few industry analysts fastened onto the recent monthly candlesticks that formed when oil prices hit 26 A similar formation had occurred back in 2009 when another bottom was established Favorable forecasts suddenly followed and investors grabbed onto the opportunity of a lifetime to ride oil all the way up to triple digits As you might expect shorts were squeezed A brief rally ensued and then a reverse occurred once the market realized that nothing fundamentally had changed
The bottom pickers quickly changed their arguments as well The word became that fundamentals were at least pointing in the right direction Imports and gasoline demand remained elevated Refineries were going all out Inventories seemed to have stabilized When the market heard there might be ongoing discussions between major and minor OPEC members concerning a possible production freeze as misguided as it was the fuse was lit for take off The oil price rocket however barely achieved lift off before gravity returned Are oil prices just establishing a new floor of support or are they preparing for another deep dive
What is the latest thinking on the near term direction of oil prices
There are still two divided camps on this issue One side argues profusely that a bottom has definitely formed while the second group posits vociferously that down is the only way to go at least for the months ahead No consensus is coalescing at present but that does not stop the shouting and screaming from the rooftops There is money to be made in newsletter subscriptions if you can claim to have made the right predictions first before the herd tramples over you to fund its positions
The Downward Naysayer Opinion The primary point made in the initial debate is that when Saudi Arabia Venezuela Qatar and Russia alerted the press that a potential production freeze might truly be in the works there was no firm agreement and no discussion about future cuts Iran was already ready to amp up its production as well The rally plain and simple was based on a rumor and should never have happened Secondly oilrig counts peaked at 1 600 in mid 2014 but have subsequently fallen precipitously down below 400 Everyone and their grandmother have predicted that supply would suffer but production just keeps rolling along Why is this Newer technologies have allowed oil producers to get more from less The rigs that have shut down were more than likely the inefficient ones that needed upgrading Thirdly even if oil prices surged to 40 to 50 the breakeven point for most North American facilities the fracking community would come to life and flood the market once again Lastly if gasoline production is up it is in preparation for the summer seasonal push All in all this bump is temporary by nature The basic supply glut problem is still with us and oil prices could hit the low twenties under this scenario
The Upward Optimist Opinion On the opposite side of the equation is a group of highly touted sages that have been respected in the past and already have large newsletter subscription bases These analysts counter that the current data is misleading because it is derived from a model with data that is months old at best The so called glut is overstated from their perspective as well They also believe that Saudi Arabia is actually moving behind the scenes to bring about the much rumored freeze since flooding the market with crude is not in its best interest The possibility of a short squeeze is therefore imminent Under this scenario macroeconomic headwinds are also less formidable China will not explode Talk of a recession in the United States in 2016 is premature Many analysts are reading the current tea leaves of leading indicators and forecasting a bump in 2017 but oil demand should not decline in the near term If anything political tensions should rise in the Middle East followed by a ramp up in oil prices The camp favoring this opinion sees 60 oil by yearend
Are there any other considerations to take into account
It is easy to side with the naysayers since many of the positions on the optimistic side must be taken on faith that the so called Gods of Oil have got it right The problem is that these experts have been wrong as many or more times than they have been correct They just shout about their successes and ignore their shortcomings One key statistic that is missing is how profitable the industry was during the first quarter It will soon be earning season and you may want to focus on such companies as BP LON BP Royal Dutch Shell LON RDSa and Exxon NYSE XOM to see how they are performing and what guidance they put forth for the balance of 2016
The IMF is also puzzled as to why there has not been a bigger boost for the global economy from lower oil prices One spokesperson for the Fund noted Since June 2014 oil prices have dropped about 65 percent in U S dollar terms about 70 as growth has progressively slowed across a broad range of countries Even taking into account the 20 percent dollar appreciation during this period in nominal effective terms the decline in oil prices in local currency has been on average over 60 This outcome has puzzled many observers including us at the Fund who had believed that oil price declines would be a net plus for the world economy obviously hurting exporters but delivering more than offsetting gains to importers
The USD actually weakened by roughly 3 5 over this last quarter a boon for global conglomerates that report their foreign earnings in U S dollars This depreciation may have also helped in the rally to a small degree but the dip was anticipated due to the actions of the Fed This weakness may soon reverse itself when the next normalization rate hike occurs in June
Bigger problems however lurk with emerging market countries and shale producers that are deep in debt Venezuela and Brazil are heavily dependent on their oil exports and have suffered Many banks loaned cheap money to shale producers that have been hanging on by their fingernails waiting for a price rise to push their cash flow into positive territory These problems do not have quick nor easy solutions
Concluding Remarks
Will we see another rally in oil prices If you look to the futures market and oil prices one year out you could jump to the conclusion that something has got to give There is a contango in the price curve indicating that traders are willing to pay more in the future than now for oil but the how and when are up for speculation The situation calls for more volatility in the near term until the fundamentals get sorted out From a forex perspective the Aussie and the Loonie have appreciated roughly 5 5 over the past three months so the world of commodities may be changing after all
Stay tuned and stay cautious
Risk Statement Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors The possibility exists that you could lose more than your initial deposit The high degree of leverage can work against you as well as for you |
XOM | 3 Catalysts To Change The Global Market This Quarter | Catalysts for change part one oil
I currently have my eye on three catalysts that I see changing the global market in the second quarter
1 The oil conundrum
2 Earnings growth
3 Volatility complacency
The catalysts are not new however the time of their influence is quickly approaching with the oil conundrum being the closest
OPEC s Doha meeting is now 12 days away and oil is clearly repricing on the idea that no deal will be inked showing that OPEC is just a cartel by name and not by action
Oil is such an influencer of global markets because cheap prices are a double edge sword
When cheap is too cheap
As the cheap oil cycle began in mid 2014 the windfall was soaked up by household consumption Cheap fuel boosts spending and in turn filters into growth this is simple economic theory
However there is an equilibrium point to cheap oil The increase in household spending due to the cheap end user price is offset by the collapse in capex and opex spending from producers creating a drag on growth
Energy producers both in Australia and globally are showing that in the current low oil price environment growth and economic inputs have suffered and are more than offsetting household spend
The collapse in capex globally just look at the cuts by Shell LON RDSa BP LON BP Exxon Mobil Corporation NYSE XOM and Woodside Petroleum Ltd AX WPL to programmed projects is clearly outweighing the consumption boost the impact on employment confidence and investment weighing on growth
Oil needs to migrate to US 50 a barrel to have a mildly positive effect Consumption would still be elevated as end price would still be well below the ten year average but US 50 a barrel would be conducive enough to stimulate production capex as internal rates of return would pop back above investment thresholds at major oil firms
Oil is therefore the first catalyst to watch in the second quarter if Doha fails as is expected oil is likely to slide back to mid to low US 30 a barrel and markets will respond to oil being too cheap similar to the January February trade period
Oil fell 1 5 yesterday and saw seven out of the bottom ten ASX 200 companies being oil exposed
Oil fell over 3 overnight The bottom ten will be dominated again by energy plays
this is the close of the official market in the US |
MRO | Chesapeake Energy Jumps Midday Energy Stocks Higher | Investing com Chesapeake Energy NYSE CHK jumped in midday trading with investors buoyed by insider stock buying
Chesapeake Energy rose 13
Director Archie Dunning purchased 2 1 million shares The purchase was made on Dec 21 and disclosed today
Overall energy stocks were higher with crude futures bouncing back following a big selloff on Monday
Crude oil WTI futures rose 5 7 and the S P 500 Energy gained 0 75
Among top gainers in the index were Marathon Oil NYSE MRO up 4 and Phillips 66 NYSE PSX which gained 2 6 |
TEVA | Why Teva Pharmaceutical Is Rallying 10 Today | What happened
Following fourth quarter financial results that outpaced industry watchers estimates shares in Teva Pharmaceutical NYSE TEVA are up nearly 10 at noon on Wednesday
So what
Teva Pharmaceutical is in the midst of restructuring its business to reduce expenses and reinvigorate sales in the face of headwinds associated with generic competition to its top selling multiple sclerosis drug Copaxone In Q4 it appears its turnaround may be taking hold
The healthcare company reported today that revenue ticked up 1 1 year over year to 4 47 billion in Q4 Non GAAP adjusted earnings per share clocked in at 0 62 Those results bested Wall Street estimates by 120 million and 0 01 per share respectively For the full year revenue fell 8 year over year to 16 9 billion
Although Copaxone revenue in North America fell 26 year over year to 264 million last quarter because of generic alternatives Teva still delivered modest fourth quarter sales growth because of strong sales of Austedo a tardive dyskinesia treatment and Ajovy a migraine treatment Austedo and Ajovy sales were 136 million and 25 million respectively in the quarter
Bottom line performance was driven by lower operating costs compared to the same quarter a year ago Non GAAP research and development costs fell to 5 3 of sales from 6 5 of sales selling and marketing expenses dropped to 14 9 of sales from 17 4 of sales and general and administrative costs decreased to 6 9 of sales from 7 5 of sales As a result non GAAP operating income was 1 06 billion up 12 from Q4 2018 and non GAAP diluted EPS was 0 62 up from 0 53 the year prior
Teva also reported its free cash flow improved to 974 million in the quarter from 522 million last year and that it eliminated 2 billion in debt last year
Now what
The quarterly performance is encouraging but more work remains Despite paying down a lot of debt the company still finished the year owing 26 9 billion and Copaxone sales are forecast to fall to 1 2 billion in 2020 from 1 5 billion last year
Fortunately the company s more recently launched drugs including Austedo and Ajovy should offset the Copaxone drag Teva is guiding for revenue of 16 6 billion to 17 billion this year about in line with last year It expects Austedo and Ajovy sales to improve to 650 million and 250 million from 412 million and 96 million in 2019 respectively
Teva is also projecting bottom line benefits associated with its cost cutting to carry over into 2020 Because the company has eliminated 3 billion in annual expenses it expects EPS between 2 30 and 2 55 this year compared to 2 40 in 2019 Investors may want to watch quarterly results throughout 2020 to make sure that early signs of a recovery in its business improve further before buying |
TEVA | Teva Pharmaceutical Industries Limited TEVA Q4 2019 Earnings Call Transcript | Teva Pharmaceutical Industries Limited NYSE TEVA Q4 2019 Earnings CallFeb 12 2020 8 00 a m ETContents
Prepared Remarks
Questions and Answers
Call Participants
Prepared Remarks
Kevin C Mannix Senior Vice President Investor Relations Technical Issues discuss Teva s fourth quarter and full year 2019 financial results We hope you ve had an opportunity to review our very detailed earnings press release which was issued earlier this morning A copy of the release as well as a copy of the slides being presented on this call can be found on our website at as well as through our Teva Investor Relations app Please note that the discussion on today s call includes certain non GAAP measures as defined by the SEC Management uses both GAAP financial measures and the disclosed non GAAP financial measures internally to evaluate and manage the Company s operations to better understand its business Further management believes the inclusion of non GAAP financial measures provides meaningful supplementary information and facilitates analysis by investors in evaluating the Company s financial performance results of operations and trends A reconciliation of GAAP to non GAAP measures is available in our earnings release and in today s presentation To begin today s call Kare Schultz Teva s Chief Executive Officer will provide an overview of the 2019 performance recent events and priorities going forward Our Chief Financial Officer Eli Kalif will follow up by reviewing the fourth quarter financial results in more detail before providing an overview of Teva s 2020 financial outlook Joining Kare and Eli on the call today is Brendan O Grady Teva s Head of North America Commercial who will be available during the question and answer session that will follow the presentation Please note that today s call will run approximately one hour And with that I will now turn the call over to Kare Schultz Kare if you would please Kare Schultz President Chief Executive OfficerThanks Kevin Good morning everybody and thanks for calling in It s a great pleasure to talk to you about our strong results for 2019 On the financial side it s worth noting that we met all the components of our 2019 guidance Revenues came in at 16 9 billion and here you should of course note that we ve changed the way we report the distribution sales that we have in Israel the SLE Company in Israel from a gross basis to a net basis And we ve done a revisions to restate the numbers so that you can see the numbers for 17 18 19 This has no impact on the earnings numbers or cash flow numbers it s simply whether you record that revenue from distribution in Israel as well as the net So we met that target of revenues We met the target for EBITDA with 4 7 billion and the non GAAP EPS of 2 40 We re also very pleased that the cash flow came in above 2 billion Now the key drivers for this was some good business performance AUSTEDO as I m sure you noticed kept on its rapid growth and has of course big continued potential We launched AJOVY in the EU and got reimbursement in the first countries very excited about that Also very excited about the fact that we just got the Autoinjector approval in U S We have it in Europe already so that looks very good also for the future And then we are very pleased with the way we manage to managed the decline of COPAXONE in both U S and actually also in Europe So we saw stable COPAXONE sales at the end of 2019 and we expect to see a modest decline in 2020 In generics we had many many launches around the world Alone in the U S we had nearly 50 launches including our first big biosimilar launch in the U S TRUXIMA And we re also very happy about the results so far of that launch We also published our first ever Global Economic Impact report And just a couple of highlights our products actually helped the U S healthcare system save 41 9 billion on a yearly basis and out of that number 6 billion was patients savings where they save on out of pocket costs So we think we contribute very well in the U S also with direct and indirect 57 000 jobs Now if we move to the next slide then you probably all remember that in 2017 so a bit more than two years ago 2 5 years ago we had a pretty dramatic situation We had a debt of 34 billion and we had COPAXONE going off patent worldwide So we were under a lot of pressure looking at a revenue loss over a couple of years of close to 5 billion The way to handle that was a restructuring plan that was meant to reduce our spend base by 3 billion thereby securing cash flow to handle the debt and securing our future earnings I m happy to report that we have executed the restructuring plan exactly as we laid it out 2 5 years ago It has not been you could say easy on the organization We ve had to close down or divest some 23 manufacturing sites Some of those are still in process of the final closures and we ve had to close more than 40 offices and laboratories around the world and say good bye to more than 13 000 employees Now we managed to do this without hurting our operational capacity in anyway We are still fully operational on all the many many products we do 30 000 different products many many billions of SKUs per year And to give you a feel for how complex the restructuring has been the next Slide shows you a map of the world and you can see that we ve been closing down a lot of sites all over in North America South America Europe Middle East Southeast Asia Japan So this is really truly been a great effort and I d like to thank everybody in the organization for the fantastic job they ve done keeping everything going in a nice way high quality while reducing the spend base Now one of the reasons why we had to do this was to handle our debt situation And on the next slide you can see that we started out when I started in the company back in the end of 2017 with around 34 billion of debt I m happy to report now that we just come at just below 25 billion 24 9 billion So it s definitely going in the right direction and you should of course expect that this trend will continue in the coming years Now talking about the debt we ve also had to do a refinancing and we ve done that very successfully in the fourth quarter And as a consequence of the refinancing we now have liquidity and projected cash flow to cover the bond repayments due in the next three years At the same time we have a situation where our EBITDA is stabilizing as we said it would Before I said that the trough year for earnings would be 2019 So that s the bottom of the trough so to speak and we ve seen that stabilization happening So when you stabilize your EBITDA and you keep on reducing your debt then slowly your ratio your debt ratio EBITDA to net debt to EBITDA will be declining and that s what we ve seeing it peaked in Q2 of 19 at 5 72 and it s been declining and has now come down to 5 32 at the end of 2019 and this ratio will keep on improving meaning that it will keep declining in the coming years Talking about the debt and we have a slide here showing the debt structure and what you can see here is that the next three years we have debt stacks of around 2 billion which basically means as I said before that we can handle these with the liquidity we have on hand right now and with the cash flow and we expect to be generating The debt stack in 23 will call for some refinancing so sometime in 22 you should expect that we will do a refinancing similar to the one that we just executed to handle that situation Now you could say the restructuring is now over and done with And so what s next So the next phase will be dominated by two elements one is a continued improvement of our manufacturing cost the gross margin improving the gross margin and the other is secured growth in the top line growth in revenues And if we move to the next slide then I d like to address the gross margin improvement program that we just initiated and that we ll be running over the coming years Now the program has five key levers and these are not new for manufacturing optimization But they are all levers where we have not taken the full advantage of these levers in the past and that s what we re going to do in the coming years So due to the fact that we have a very widespread manufacturing network and very many products we can still improve on our procurement cost excellence and this is what we re going to be doing by consolidating things getting better overview of the situation and making sure that we get all the procurement benefits around the world Now we can also still improve our network We had around 80 manufacturing sites when I started Technical Issues and you will see this happening in the future year by year but there is another way to optimize and just consolidate manufacturing sites and that is to optimize each and every site on their own basically making sure that the manufacturing volumes should have financial Phonetic capabilities that you utilize your manpower your equipment through the fall And in the restructuring we really focused a lot on sort of optimizing the network footprint closing sites and moving things so that we could consolidate our volumes Now in the coming years we will also be very focused on optimizing each and every manufacturing site for better efficiency better ratio between output and costs and we are very convinced that this is something we can do successfully Then given the fact that we still have around 60 manufacturing sites worldwide and we sell billions of products every year 30 000 different products Then of course the whole supply chain optimization is very important and we are working hard to reach a situation where we have global systems that cover our entire supply chain and that will be the basis for continuous optimization of the supply chain And then last but not least we need to have an agile operating model and organization and I m happy to inform you that the new Head of our Manufacturing Organization Eric Drape has yesterday reorganized his organization to have a more technology focused setup where we ensure that all the best practices can be implemented in a fast and consistent way across the world Now some of you who are thinking more about the investment in Teva might say OK this is very nice all textbook stuff about optimizing manufacturing but what does it really means to the P L And if you look at the next slide you can see here the operating margin expansion that we are projecting and you will notice that the target is 28 in non GAAP operating margin at the end of 2023 Now there s really nothing new to this because this is our long term financial target that we already communicated in 2018 So what we re doing now is part of the plan from the beginning And the reason why it s not the 27 you heard in 2018 is simply that the change of the reporting from gross to net on the Israeli distribution lifts off mathematically this percentage by a 0 9 percentage points So that s why we revised the target from 27 to 28 So this is our commitment that we will aim at reaching 28 operating margin at the end of 2023 So that s on the cost side you will see Then on the revenue side I just explained that we need some strong growth and we need some strong growth drivers So here we have two key products that are very important One is AUSTEDO and the other one is AJOVY and I ll talk a little bit about both of those If we move to AUSTEDO first then before I get into the sort of new things that we are looking at in our clinical development I d just like to say that we are very very pleased about the performance of AUSTEDO in 2019 We keep on accumulating patient basis and that of course helps a lot of patients It is also a good contribution to our revenue growth Right now we have around 9 000 patients on a daily basis using AUSTEDO and if you think about the growth potential you will know that in tardive dyskinesia there is only AUSTEDO and one other competing product that has been approved in the last couple of years It s the first products ever for this indication So for the first time ever there is a way to treat tardive dyskinesia It s our estimates that there is around 500 000 patients suffering from tardive dyskinesia in the United States alone And that of course puts into perspective the fact that we have so far gotten to 9 000 patients on AUSTEDO and it just indicates that we believe that this product can keep growing for many years to come On top of the current indication in Huntington s disease and in tardive dyskinesia we are also working on two new indications One is very imminent That s Tourette syndrome where we have conducted a Phase III trial and the results will be reported in the coming months So that s very very close to being reported Of course we hope there ll be a positive outcome we don t know It s too early to say but it will be really good for patients if we saw a positive outcome of this trial We are also doing a Phase III trial treating dyskinesia in cerebral palsy There is no drug really approved for that So it will be a first if it s possible to show a good clinical effect These data we will see sometime in 2021 but both these new indications are very exciting and hopefully they succeed to the benefit of patients But of course also to the benefit of the growth of AUSTEDO sales If we move to AJOVY then we have a lot of regulatory approval activities ongoing We are in the middle of launching in Europe We ll be launching our Autoinjector soon in Europe It has been approved And talking about the Autoinjector we are also very pleased that we ve had the Autoinjector approved in the United States and we will also in the coming months be launching the Autoinjector in United States We hope in the migraine indication that we will get back to a capture rate of around 25 based on the fact that we now have a competitive device and we have a very very competitive clinical profile We re of course also working on bringing AJOVY to the rest of the world For instance in Japan where we just had really good clinical results together with our partner Otsuka for the partner for Japan And then in many other market So you will see a lot of launches of AJOVY in 2020 In terms of clinical development if we move to that and of course we re also working on expanding the clinical indications for AJOVY and we are doing some Phase II trials where we are expecting results in 2021 One is in post traumatic headache a very serious and quite widespread problem for many patients in the U S And of course we hope to be able to show effect there And the other one in fibromyalgia which is also a disease that has a big patient population in the U S and a disease where there is really no real good treatment Now talking about the different lifecycle managements we are doing on AUSTEDO and AJOVY Eli is going to talk about our total specialty pipeline And we ve not disclosed this before but we are very happy about our pipeline As you know we have a strategy where we want to be leaders in generics and we want to aim for a leading position in biopharmaceuticals And if you look at the pipeline you will see that we have a high number of biosimilars in development and we had one imminent launch in biosimilars In Novel Biologics we have a lot of different things going on The most exciting short term is Fasinumab that we are developing together with Regeneron and where we hope to see data this year from the Phase III trials and we re very excited about that and we we ll see a big potential if it succeeds in clinical development On the small molecule side we re really not doing a lot of say new molecules but we are doing some exciting long acting products in different CNS indications and of course we do have the lifecycle management that we re doing on AUSTEDO And then we have a brand new thing which is I would say potentially revolutionary in the respiratory field and we have developed and gotten approval for some very very sophisticated Digihaler is basically respiratory inhalers to treat asthma And we are working now on launching these products sometime during this year and we are very excited about that If we move on to generics And we are the world leaders in generics And in order to maintain that position of course you need to do a lot of generic projects and we do so more than a 1 000 generic products are currently under development And you ll see here that the big numbers are quite favorable Between 2020 and 2030 there are some 210 billion Phonetic in originator sales that go off patent And you will see that that fits very well with our business where we have around 4 billion in revenue in North America and we are loading in some 400 million 500 million of new sales every year which is basically if you think about the math it s the 210 billion split out over 10 years We get some 10 to 12 of that and that s a price discount of some 80 for the generics compared to the originators on average and that ends you up with the 400 million to 500 million that we load into the market of new sales every year We of course also have a strong pipeline of generics in Europe and international markets And overall we are very confident of maintaining our leadership and also maintaining a good profitability going forward Now talking about profitability leads me to the long term financial targets And as I ve already showed you we have a target by the end of 23 to have a 28 operating income margin We have a target already today to be above 80 in the cash earnings and we have a target to get our net debt to EBITDA below three times which we still aim at doing at the end of 2023 And now to talk about the financials I would like to hand over to our new CFO Eli who will take you through the financials Over to you Eli Eli Kalif Executive Vice President and Chief Financial OfficerThank you Kare and good morning and afternoon to everyone I would like to start by saying that I m extremely pleased to be here today as part of Teva team I will start with a review of our financial results and then we ll follow that with the first look to our 2020 guidance as well as some of the major assumptions behind it Beginning on Slide 20 we start with a review of our GAAP performance In Q4 2019 we recorded a GAAP operating income of 148 million a GAAP net income to Teva shareholders of 110 million and a GAAP earnings per share of 0 10 This compares to Q4 2018 when we recorded a GAAP operating loss of 3 2 billion and GAAP net loss to Teva s shareholders of 2 9 billion and a GAAP loss per share of 2 85 The year over year improvement in the quarterly result was mainly driven by the impact of non recurring items which had as much greater negative effect in Q4 2018 compared to Q4 2019 Turning to Slide number 21 We see impairment provision of 477 million for intangibles in Q4 2019 of which 259 million in the U S intangible assets related to the acquisitions of Actavis Generics This compares to 2 7 billion of goodwill and 1 billion of intangibles in Q4 2018 Phonetic Amortization was 290 million for the fourth quarter and we expect 2020 run rate should be at the average of 250 million and 260 million per quarter Lastly restructuring charge of 59 million in the quarter were consistent with the ongoing activities throughout 2019 As we turn to Slide 22 we review our non GAAP performance Quarterly revenue were 4 5 billion up slightly compared to Q4 2018 Revenue were mainly affected by higher revenue from AUSTEDO AJOVY TRUXIMA QVAR ProAir and ANDA in the U S as well as Europe generics new product launch and Russia offset by generic competition to COPAXONE as well as decline in revenue from BENDEKA and TREANDA Israel and Japan Compared to Q4 2018 we experienced a negative FX impact of 470 million Net of FX revenue in Q4 2019 increased by 96 million or 2 Gross margin for the quarter was 60 6 compared to 52 7 in Q4 18 The change in gross margin was mainly driven by a declining share and profit of COPAXONE in the U S as an increasingly less profitable distribution business partially offset by the ramp of AUSTEDO and AJOVY as well as an increase in profitability of API and other activities Operating profit in Q4 2019 was 1 1 billion a 12 increase compared to Q4 2018 The increase was mainly due to the ongoing cost reduction program higher revenue for AUSTEDO and the ProAir family partially offset by a decline in COPAXONE and other specialty brands mainly BENDEKA TREANDA Compared to Q4 2018 we experienced a negative FX impact of 29 million thus operating income increased by 144 million or 50 net of FX We ended the quarter with a non GAAP EPS of 0 62 18 or 0 09 higher than Q4 2018 Mostly due to higher operating profit and lower finance expenses partially offset by higher debt Before going further with my review of the quarter I would like to take a few minutes to discuss the revision of previously reported consolidated financial statements related to our Israeli distribution business SLE This business is part of the International Markets reporting segment which facilitates distribution of Teva and third party products to pharmacies hospitals and other organization in Israel In connection with the preparation of Teva consolidated financial statements for the fiscal year ended December 31st 2019 Teva determined that in the full years and interim periods of fiscal years 2017 and 2018 and the first three quarters of fiscal year 2019 is an immaterial error in the presentation of the distribution revenues from its Israeli distribution business The Company evaluate the cumulative impact of this item on its previously issued annual financial statements for 2017 and 2019 and interim financial statement for 2017 and 2018 in its first three quarters of 2018 Phonetic It concluded that the revisions were not material individually or in aggregate to any of its previously issued interim or annual financial statements Teva has revised its presentation of the net revenue and cost of sale in the historical consolidated financial statement to reflect this item The impact of this revision is a decrease in the net revenue with an offsetting decrease in the cost of sales There is no impact on the gross profit operating income or earnings per share In addition there is no impact on Teva s balance sheet or statement of cash flows for the related periods On Slide 24 you can see a very detailed illustration of what s changed and what did not due to the revision I just described Throughout the presentation we have noted the revisions in some cases like we have done here that presented results both prior to and after the revision in order to assist you in your analysis Now turning to Slide 25 We can see that the fourth quarter was especially strong one for free cash flow Teva free cash flow in Q4 2019 was 974 million an increase of 452 million or 87 compared to Q4 2018 and more than 2 billion for the full year 2019 exceeding our annual guidance The difference compared to Q4 2018 was mainly due to the higher net income focused working capital management as well as a few one items most notably SLE sale and leaseback deal As it relates to the working capital in 2020 I would note that we expect working capital to be neutral to positive source of cash Generating free cash flow is our greatest focus in order to successfully continue reducing our debt load an effort which is highlighted in Slide 26 We ended the year with a net debt of just under 25 billion and a net debt to EBITDA ratio of 5 32 times the second consecutive quarter decline Our expectation is that by the end of 2020 our net debt to EBITDA ratio will be below five times As Kare mentioned in his remarks following our successful financing in November our liquidity and expected cash flow will cover bond repayments for the next three years Now let s look at the development of 2019 results versus our guidance here on Slide 27 We present the full year 2019 performance compared to the original guidance issued at the start of 2019 as well as the revised guidance from November will serve us to bring up the bottom end of all of the ranges Please note that as it s related to revenue the guidance range are the original range and do not reflect the revision of SLE To add in your analysis representing the 2019 sales prior and after the revision And as I mentioned earlier there is no further impact on the other metric that you see here including cash flow We are very pleased with the overall performance throughout the year which allow us to meet all of our financial guidance target We believe this results provide a strong foundation for us to begin growing from 2020 and beyond Turning to Slide 28 I would like to give you a brief overview of some of the main assumption for our 2020 financial guidance which can also be found in this morning s press release The most notable assumption is our global COPAXONE revenue which we expect to decline by approximately 300 million versus the full year 2019 The majority of this decline is expected to come mainly in the U S but the decline will be offset by the ongoing growth of AUSTEDO and AJOVY We expect continued momentum of AUSTEDO in both tardive dyskinesia and Huntington disease and expected sales to grow to 650 million in 2020 Furthermore AJOVY is expected to benefit from continued patient growth in both U S and Europe where we continue ramp up our initial launch in Germany Global sales of AJOVY are expected to be approximately 250 million I would like to add that we expect both North America and U S generics to be relatively stable compared to 2019 benefiting from new launches which help us to offset regular price erosion or losses of exclusivities In fact the only real pressure we see is in our international generic where Japan continues to be a drag on our other regions due to their National Health Insurance price revision A few more items to highlight in our assumptions foreign exchange rate movements are expected to have a moderate negative impact on revenue and operating profit versus 2019 Looking at tax in 2019 our tax was 18 As we guided last November you will recall that our 2019 tax was higher than previous years due to the interest expense disallowance resulting from U S tax reform and other changes to the tax provisions As we look at 2020 we expect our tax to remain in the 17 to 18 range So now turning to our financial outlook for 2020 on Slide 29 Based on the assumption I just reviewed as well as the SLE revenue revision we expect total 2020 revenues to be between 16 6 billion to 17 billion Non GAAP operating income is expected to be between 4 billion and 4 4 billion while EBITDA is expected to be between 4 7 billion Phonetic to 4 9 billion Using a share count of approximately 1 1 billion shares we expect earnings per share to be in the range of 2 30 to 2 55 Lastly 2020 Phonetic free cash flow is expected to be in at range of 1 8 billion to 2 2 billion And this concludes my review for the fourth quarter results and 2020 financial guidance We will now open up the call for questions and answers Operator would you please open the call for questions Questions and Answers OperatorThank you very much Operator Instructions The first question we have today comes from the line of Gregg Gilbert from SunTrust Please go ahead Gregg Gilbert SunTrust Robinson Humphry AnalystThank you First Kare I was hoping you could provide whatever update you can about progress on the settlement framework you laid out a few months ago given its importance to cash flow and debt etc in the coming years And my follow ups for Brendan How can we best think about U S generics sales in 2020 and can you provide the obligatory update on important products like generic Forteo and NuvaRing and whether they re factored in for this year Thank you Kare Schultz President Chief Executive OfficerThanks for those two questions So I ll address the first one and Brendan will to do the second The framework that we negotiated last year is still being worked on And the AGs are active and we are active in this And so is the other participants in the framework the three distributors and Johnson Johnson And I m still cautiously optimistic that this will result in an actual settlement and this will be I think positive for the U S population It will be positive for those the people in the U S suffering from substance abuse So I m optimistic that it will come to fruition There is of course the New York trial coming up around 20th of March and it would of course be beneficial if the settlement could materialize before that date so that we wouldn t have to go through that trial But it remains to be seen There is nothing firm on it but I ll just repeat that I m optimistic about the changes of the framework resulting in a firm settlement Brendan Brendan O Grady Executive Vice President North America CommercialGood morning and thanks for the question So in regards to the North American generic business we see this year 2020 much like we did 2019 It is around a 4 billion business and should continue to be right around that range We get a lot of questions around the products and with some of the big product launches here Of course Restasis we continue to work with the FDA and have positive discussions there as well as NuvaRing So they are in the 2019 plan Of course they re properly risk adjusted TRUVADA is there as well in Q4 And of course we ve already launched the biosimilar TRUXIMA which is the Rituxan biosimilar which is going quite well and we ll launch HERZUMA in the March timeframe So all in all we see this year shaping up very similar to last year as far as the U S or the North American generic business which is stabilized for us quite nicely Kare Schultz President Chief Executive OfficerThank you Brendan Next question OperatorThank you very much The next question comes from the line of Ronny Gal from Bernstein Please go ahead Ronny Gal Sanford C Bernstein Co LLC AnalystGood morning everybody and thank you for taking my question First question is for Eli around cash flows I m kind of looking at your cash flow year over year and you re basically pointing us to essentially flattish free cash flow You had a lot of impairment charges in 2019 that probably should not recur in 2020 associated with elimination of staff and so forth Is there anything in the free cash flow in 2020 that we should be aware of Is there did you put some additional reserves for settlements and so forth or is this essentially the earning power of the business And the follow up is around the biosimilar business If I understand what Brendan told us you guys are putting the biosimilar revenue in the U S into the generic business I was wondering if you can tell us a little bit about the relative contribution here the margins And I noticed that you ve got TVB going into in the clinical already but I couldn t find it in ClinicalTrials gov Can you share with us what that product might be Kare Schultz President Chief Executive OfficerSo Eli will take the first one and then Brendan will take the second part Eli Kalif Executive Vice President and Chief Financial OfficerHello Thanks for the questions So if you look on 2019 in terms of cash flow We have kind of several one items One of them as I mentioned in my prepared remarks is the SLE lease back This one equivalent around 120 million and we have some significant reduction in our working capital mainly associated with inventories of around 200 million for Q3 to Q4 as well year over year of around 300 million So if you actually it still goes to too many items you will end around 1 7 billion 1 8 billion working now on the midpoint of around 2 billion for next year and this is associated with what we re doing now in terms of operations and margin and again more positive I would say elements on working capital Ronny Gal Sanford C Bernstein Co LLC AnalystSo this is really the earning power of the company in terms of cash flow That s a good it s a good base to start the improvement for the following years Thank you Brendan O Grady Executive Vice President North America CommercialYeah correct So Ronny in regards to the biosimilar so as you know we launched TRUXIMA in the fourth quarter and we were fairly pleased with the uptake of TRUXIMA in the fourth quarter We achieved double digit market share and you can see the market share kind of it s been bopping around between 12 and 15 We think we can grow that and we re pleased with the growth seen as well We re not going to get actually into the margin you can probably back into that a little bit but as you know we have a profit share with Celltrion So it s something that we don t really disclose But we are reporting TRUXIMA as well as HERZUMA in the generic business And I missed the last part of your question Ronny Gal Sanford C Bernstein Co LLC AnalystYou ve got in your pipeline a product supposedly in Phase 1 a new biosimilar that you re developing on your own in Phase 1 and it s not on ClinicalTrials gov I wonder if you can share with us what that is and should we see it there soon Brendan O Grady Executive Vice President North America CommercialRonny I would actually prefer not to comment on anything that early in the pipeline So we ll share more information with you that is appropriate at the right time Ronny Gal Sanford C Bernstein Co LLC AnalystThank you Kare Schultz President Chief Executive OfficerThank you next question OperatorThank you very much Operator Instructions The next question we have comes from the line of Louise Chen from Cantor Please go ahead Louise Chen Cantor Fitzgerald AnalystHi thanks for taking my questions here So my first question here is if you could elaborate more on some of the pushes and pulls that actually get you to a sales and EBITDA growth in your guidance for 2020 And then my follow up here is can you elaborate also a little bit more on the outlook for the European and the rest of the world generic market Thank you Kare Schultz President Chief Executive OfficerThank you I ll take those So if you take the push and pulls then of course you got the main push and pulls regarding the main assumptions So there is a pull coming from the global COPAXONE where we are saying that we did 1 5 billion in 19 and we expect to do 1 2 billion in 2020 that s roughly around 700 million in U S 400 million in EU and a 100 million in international markets So that s a pull of 300 million And then we have AUSTEDO and AJOVY growing and altogether they grow up to 900 million that s a plus of 400 million So that of course net positive of 100 million Then once you get into the details and of course there is a lot of details Eli mentioned that we have price erosion on some of the key products in Japan linked to the reimbursement system of the Japanese government So there is a decline there We have other elements where we have increases So a lot of smaller moving parts If we look and sort of sliding to the second part of your question about the generic business in Europe and in international markets then we are expecting and we said this before as well we are expecting low single digit growth of the generic market in Europe and also in international markets If you exclude the price pressure that we re seeing on the long listed products in Japan So a low single digit growth of generic and OTC for that matter in those markets Thank you Next question please OperatorThank you The next question comes from the line of Esther Rajavelu from Oppenheimer Please go ahead Esther Rajavelu Oppenheimer Co AnalystGood morning Thank you for taking my questions Kare a quick one for you if I may You ve talked about 2019 as a trough year for earnings yet the low end of your earnings guidance is below 2019 results Can you walk us through some of the considerations that went into setting that lower end of the guidance range Kare Schultz President Chief Executive OfficerSo when you set your guidance range you will always have some kind of needed flexibility because you don t know what s going to happen And I have not missed the guidance of the company I ve been working at for 62 quarters in a row I m not planning to start doing that now So that means that in your guidance you always need a certain flexibility for having some unforeseen events happening and you can never sort of say to investors that there won t be bad surprises right So therefore of course the guidance includes a certain level of flexibility to handle bad surprises That s just the way it is and that s also the way it should be because with the breadth of our business globally we cannot foresee anything that might happen during a full year So therefore you re right at the low end But low end is of course on what we are aiming for that will never be the case but it reflects the fact that there s always uncertainty in any business Esther Rajavelu Oppenheimer Co AnalystThank you And then a quick follow up on AJOVY How are you thinking about the U S OUS split in that 250 million guidance and do you think an oral CGRP for prevention in the U S could disrupt the market for meds meaningfully either on pricing or patient preferences Kare Schultz President Chief Executive OfficerYeah So a quick answer to this roughly 200 million in the U S and roughly 50 million outside the U S with some variation of course depending on the launch speed outside of the U S and we don t think that the acute therapies that are coming to the market will have any meaningful effect on the preventive therapies that we re talking about here Next question please OperatorThank you very much The next question comes from the line of Amy Fadia from SVP Leerink Please go ahead Ami Fadia Leerink Partners AnalystHi good morning Thanks for taking my question Can you talk about some of the dynamics with regards to AJOVY in the U S market now that you have an Autoinjector Would you be more aggressive with regards to contracting and getting formulary access there to drive further growth And if you can talk about how that dynamic might play out in the context of some new entrants in the market there And then I have a follow up Kare Schultz President Chief Executive OfficerThank you very much Brendan will answer your question Brendan O Grady Executive Vice President North America CommercialSo yeah I mean when you look at the the preventative CGRP market in the U S and we knew that as we went through 19 there were going to be ebbs and flows as to how things went with AJOVY But in general we have the payer coverage that we need to hit our targets we re about 70 preferred coverage across U S Of course there are gaps that we continue to work on and we continue to have conversations with payers but it s certainly a balance as you look at your gross to net as to how aggressive that you like to be and you need to be We think now that we have the Autoinjector approved as we as we prepare for launch which we ll do here in the next couple of months We will have an offering that is really unmatched in the CGRP market will have the prefilled syringe will have the auto injector will have the ability for medical on the medical side as well as on the self administer patient side And of course we have the quarterly dosing which continues to increase So the quarterly dosing now is up to about 17 1 We continue to see that grow and that s really indicative of AJOVY being the longest acting CGRP preventative therapy So we re quite optimistic about the continued growth of AJOVY and our competitive place in the market Ami Fadia Leerink Partners AnalystOkay thank you Can you also talk about the market opportunity in Tourette syndrome for AUSTEDO and then maybe if possible give us an update on the Forteo application Thank you Kare Schultz President Chief Executive OfficerYeah So on Tourette of course we haven t seen the final Phase III data So it s a bit too early But it is quite clear that if we were to see positive outcome of the Phase III trial And following that if we were to get an approval from FDA this is a very clear medical need for thousands of patients So there is definitely a very meaningful use of the product in that indication and there is a very meaningful market for the product in that indication And then on your I guess your third question on Forteo Brendan Brendan O Grady Executive Vice President North America CommercialYeah I ll just give you a quick update on Forteo We continue to work with the FDA on Forteo as you know And if we re successful this year it would be late this year or could slide into 2021 We ll wait and see that we re continuing to work with the FDA on it Kare Schultz President Chief Executive OfficerThanks Brendan next question OperatorThank you The next question comes from Umer Raffat from Evercore Please go ahead Umer Raffat Evercore ISI AnalystHi Since everyone is asking 1 3 questions I ll do the same First Kare on the 2020 guidance I noticed you re guiding ahead of consensus on the AJOVY and AUSTEDO and a little bit on COPAXONE too and yet the overall guidance is not ahead of consensus It almost makes me ask is that delta entirely explained by the revision in ANDA distribution ex U S or are you guiding slightly below consensus on generics as well That s first Second the Tourette s trial you re flagging as a catalyst it s my understanding that trial has been concluded since November and I would have thought we should have results by now And the fact that we don t makes me wonder maybe we shouldn t be setting high expectations but you flagged it very prominent So I m curious where you guys shake out and what are you expecting from that trial especially knowing Neurocrine did not work there And finally the operating margin target of 28 that you are setting out can you give us a little more color on that as it relates to whether it assumes additional SG A R D declines or do you have to assume at least 2 billion in new revenues to get to those margin targets Thank you Kare Schultz President Chief Executive OfficerOkay Yeah like you said three integrated questions and let me try and answer all three of them relatively briefly So first of all the dynamics I mentioned on the revenue they are really sort of reflecting a marginal increase in revenue which is also what the guidance is reflecting if you look at it We re not seeing a dramatic increase in revenue and of course it will accelerate in the coming years simply due to the math that as we ve talked about before the drag from COPAXONE is getting less and less as you can see and the contribution from AUSTEDO and AJOVY is getting bigger and bigger In terms of North American generics we are also maintaining the guidance we ve had for the past I would say two years which is the North American generics around 4 billion which means 1 25 billion It can be up and down it can be between 900 million and 1 1 billion But that s really how we see it also for the year as the common rate yeah On Tourette you re absolutely correct We don t know You know the way it works with trials is of course that they are completely blinded they get you end them you clean the data you do the analysis and until you sort of have the final conclusions you don t inform anybody about it other than the team that s working on it So I have no knowledge about it just like you have no knowledge about it So it s anybody s guess you re absolutely right Other products has failed in these trials I have no reason to believe different than anybody else So that basically means that in a situation like this there is you know a big chance of success and a big chance of failure That s the way it is with any Phase III trial In terms of the 28 margin then what I tried to explain it presentation was that we are now intensively working on a gross margin improvement project As you know our gross margin is around 50 which means that the biggest cost elements in our entire P L is our manufacturing costs and that also means if you want to see a meaningful improvement in your total margin then you really need to try and improve that element and that s really what we re driving for now doing a lot of things at the same time ending a very consistent gross margin improvement program Now that also means that what you should expect will be done in order to reach the 28 It s a combination of improving the gross margin modest growth in the top line no dramatic changes to the R D and the commercial cost pattern Next question please Umer Raffat Evercore ISI AnalystThank you OperatorThank you very much The next question comes from Randall Stanicky from RBC Capital Markets Please go ahead Randall Stanicky RBC Capital Markets AnalystThanks Kare looking at your net leverage target of just under 3 times by 2023 If we take the current net debt and apply roughly 2 billion in free cash flow pay down through that time period the implied EBITDA growth or the applied EBITDA is closer to 6 billion That seems like a big jump And even if we take a higher free cash flow assumption we still get pretty robust EBITDA growth So the question is what is your confidence in that current leverage target for 2023 And then the follow up is you ve been talking more recently about China than you have in the past the revenue opportunity there for our products like TREANDA and AUSTEDO Can you talk about how important China is over the next three to five years and how much revenue contribution you think you can get from that region Thanks Kare Schultz President Chief Executive OfficerYeah let me answer both of them Let me start by China and saying it s not a significant contribution over the next three to five years but it s a ramp up from basically close to zero and that means it s meaningful in the outer years Of course five to 10 years out you will see that the strong percentage growth per year means the absolute number starts to be meaningful sort of five to 10 years out And China is a slow moving market where you need to launch your products and then they survive for long time and they keep growing for long time I ve done that in my previous two companies very successful and I think we can do exactly the same here with products such as TREANDA AUSTEDO and so on So it s a more long term play than it s a short term factor I am very firm on the target of going below 3 times I ll give you the simple math just like you just laid out let s say we had just below 25 billion right now At the end of 23 we ll probably be let s just say very simplistic math at least 8 billion lower right hopefully a little bit more because we ll do 2 billion plus a year That takes us to somewhere between below 17 billion Now if you then say hey what is 17 divided by three That s just below six So that means we need to grow EBITDA somewhere between 5 5 billion and 5 8 billion And I think that s very realistic So you re absolutely spot on with the math But it s very doable and it s our plans to do it Randall Stanicky RBC Capital Markets AnalystGreat that s helpful Thank you Kare Schultz President Chief Executive OfficerNext question please OperatorThank you The next question comes from Balaji Prasad from Barclays Please go ahead Balaji Prasad Barclays AnalystHi good morning and thanks for taking the questions Firstly on biosimilars can you throw some more color on the TRUXIMA market dynamics Your competitor has come in with a strong discount and IMS shows you have a strong Q4 Can we expect this run rate to be maintained with a surprisingly aggressive discount Kare Schultz President Chief Executive OfficerSo yes when you look at the biosimilar I assume that you re when you re talking about discount you mean there reduction of WAC price relative to the innovator yes So we were 10 under They came in at 23 24 under But of course there is more gross to net that happen in the overall channel So I think you have to take a look at how you balance that between the GPOs between the payers certainly have to take ASP into consideration and physician reimbursement So all of those things are part of our competitive offering and I will tell you that we certainly want to maximize the value of the biosimilar launch But at the same time we intend to be competitive on pricing and make sure that make sure that everybody in the value chain realign that appropriately to be successful Balaji Prasad Barclays AnalystGot it That s helpful Just secondly on Celltrion announced its 2030 plans Do you see an opportunity for you to enhance your current partnership which is just limited to 2 biosimilars Could you take it up higher Kare Schultz President Chief Executive OfficerPotentially I mean we re certainly open to having those conversations and we have a good partnership going right now with the first two We re very optimistic about the launch of TRUXIMA So we ll see where it goes Balaji Prasad Barclays AnalystThank you Kare Schultz President Chief Executive OfficerThank you Next question please OperatorThank you The next question comes from the line of Soo Romanoff from Morningstar Please go ahead Soo Romanoff Morningstar Inc AnalystHi Just a great quarter In the generic side I know you have TRUXIMA as a positive but I think you had 50 launches on the generics I mean is there is that kind of offsetting any pricing or is the pricing stabilized Kare Schultz President Chief Executive OfficerSo the pricing for us is somewhat stabilized And I think it depends upon your portfolio and your mix What you have launched that s new what goes into transition and what your basis But for us we ve seen the pricing stabilize for us It doesn t mean that on the base business that we don t have consists in RFPs and price challenges and everything else because you do continue to see erosion there But new launches is certainly important and it s not necessarily because that s how you refill the bucket which you are losing on the base business And it s not always necessarily the number of new launches it s you can have fewer launches but higher value launches So it kind of depends on the mix We had between 40 and 50 as you point out last year depending upon what you count as the new launch We probably will do fewer launches this year but we may have some higher value launches So overall that s kind of the ebb and flow of the generic business Eli Kalif Executive Vice President and Chief Financial OfficerYeah I guess to repeat the overall numbers We have a North American generic business of just around 4 billion and we see you could say price erosion every year stabilizing probably at around 400 million so like 10 But then we see new launches also of around 400 million It could be 500 hundred could be 400 million it goes a little bit up and down But in the big picture we see this as a very stable business going forward And the same goes for Europe where we see this modest single digit percentage growth of the business and the only real challenge you could say on the pricing we have right now is in Japan where the price reforms means that the long listed products are coming down in value and some of the generics are coming down in value So overall our generics business is in very good shape Soo Romanoff Morningstar Inc AnalystYeah that s super helpful especially since you re kind of fighting off the COPAXONE and then the generic pricing So yeah and great great stuff on the specialty side also Thank you Eli Kalif Executive Vice President and Chief Financial OfficerThank you Kare Schultz President Chief Executive OfficerThank you Next question please OperatorThank you The next question comes from the line of Elliot Wilbur from Raymond James Please go ahead Elliot Wilbur Raymond James AnalystThanks good morning Kare just want to go back to the AJOVY opportunity in Europe Could you reframe for us once again how you see that opportunity relative to the U S in dollar terms And then what you think your ultimate capture could be of that market I know you ve talked about hoping to get back to 25 in the U S but how are you thinking about the relative European or ex U S opportunity I should say And then I also want to go back to you ve talked about the operating margin target quite a bit already but wanted to just drill down on that a little bit more If I think about 350 basis points of improvement headed into 2023 I mean that translates into incremental operating profit of around 630 million Relative to your total COGS line currently it seems to be a very small number and I would have expected just giving some of the more aggressive restructuring or manufacturing optimization initiatives that the ultimate savings there would be far greater than what we re seeing which obviously also includes some element of growth in the business overall So just if you could maybe provide a little bit more granularity in terms of what the actual dollar amount that could come out of the COGS line over the next couple of years versus growth in the business that would be helpful Thanks Kare Schultz President Chief Executive OfficerSure So let me take those two questions So first we have the question about AJOVY outside of the U S and if we look at Europe first then one thing which is interesting actually given today s debate about some super pricing in the U S is that the pricing level we are seeing in Europe so far and that we expect to see going forward including different government rebates and so on the net pricing is very similar between U S and Europe So we don t have this situation where Europe is priced lower and the frequency of chronic migraine and the treatment of chronic migraine is at the same level in Europe as in U S basically meaning and you have a slightly bigger patient pool in Europe than you have in U S There is traditionally a slower penetration in Europe than in the U S for couple of reasons One of the reasons is that you have 35 countries each with their own healthcare systems and reimbursement systems So it takes a while to do the negotiations and get on reimbursement country by country We re doing quite well We got a lot of the big countries But we re still working on others And that means that your ramp up curve in terms of the market penetration is slower Our expectation is that we can commence the same share basically a 25 share We believe we have a clinical profile which is actually the best in the market It s longer acting than your products it s both quarterly dosing and monthly dosing and now we have a really really good Autoinjector that matches the competition So we believe that 25 is a realistic target for this market On top of Europe you could say there is a lot of small countries but there is also Japan where we have outlicensed the product to a very good partner Otsuka that I know for many years And they just concluded very successfully the local trial in collaboration with us with excellent clinical outcome once again As you ll notice AJOVY has only had excellent clinical outcomes in all trials short long whatever and now also in Japan So we re also optimistic about the opportunity in Japan So long term but now we re talking maybe five years out you probably see the same potential for AJOVY in U S as in the rest of the world Now addressing your second question then 2023 is not the end of the optimization of our manufacturing operations But what we are doing now is a long term program that we ll continue most likely for the next 10 years where you optimize on a sustainable basis more and more by integrating your manufacturing more and more Let s remember we come from a situation the company was created out of 20 mergers manufacturing sites all over world not really consolidated IT systems not consolidated manufacturing planning And we are improving all of that as we speak and we think the target we gave you for 28 in 2023 is very realistic And then after that of course we will continue to work on optimizations but it doesn t happen that fast in manufacturing So I m sure you know regulatory requirements approvals stability programs all the things you need to do when you consolidate and optimize your manufacturing is something that takes time And therefore I think it s a realistic target we have but it s also a cost of development and it s of course something we will keep on doing also after 2023 Yeah last Kevin C Mannix Senior Vice President Investor RelationsI think so do we have any more OperatorNo Kevin C Mannix Senior Vice President Investor RelationsSo thank you everybody for joining us today I think we re past the 9 o clock time We apologize for those who were not able to ask a question We ll be around all day and throughout the rest of the week and next week to answer any of your questions Thanks again for joining us OperatorThank you very much That does conclude the conference for today For those of you wishing to review this conference The replay facility can be accessed by dialing the standard international number of 44 3333 009785 Once again 44 3333 009785 using the conference ID number of 1459117 Thank you all for participating You may now disconnect Duration 62 minutesCall participants Kevin C Mannix Senior Vice President Investor RelationsKare Schultz President Chief Executive OfficerEli Kalif Executive Vice President and Chief Financial OfficerBrendan O Grady Executive Vice President North America CommercialGregg Gilbert SunTrust Robinson Humphry AnalystRonny Gal Sanford C Bernstein Co LLC AnalystLouise Chen Cantor Fitzgerald AnalystEsther Rajavelu Oppenheimer Co AnalystAmi Fadia Leerink Partners AnalystUmer Raffat Evercore ISI AnalystRandall Stanicky RBC Capital Markets AnalystBalaji Prasad Barclays AnalystSoo Romanoff Morningstar Inc AnalystElliot Wilbur Raymond James Analyst
More TEVA analysis
All earnings call transcripts |
TEVA | Teva Pharmaceutical Reports a Step Back in 2019 | Teva Pharmaceutical Industries NYSE TEVA reported its results from the end of 2019 on Wednesday and the big story was the headwinds it faced Generic competition for Copaxone declining generic drug prices and a big debt load continued to pester the giant drugmaker but it looks like all three of those issues are receding
The worst is over
In 2019 total revenue declined 8 to 16 9 billion but rising sales of some newer drugs more than offset the falling sales of Copaxone during the last three months of the year
Fourth quarter sales of Austedo a treatment that prevents involuntary muscle movement rose 98 to 136 million Sales of Ajovy a new monthly injection for the prevention of migraine headaches reached 25 million and could climb much higher if it becomes popular among the millions of Americans who suffer from those debilitating headaches at least a few times each month
As a result fourth quarter sales rose 1 to 4 5 billion and revenues will probably continue rising as Copaxone s slide flattens out in 2020 The aging multiple sclerosis treatment was responsible for just 11 of Teva s North American revenue during the last three months of 2019
Paying down debt
This year Teva Pharmaceuticals expects revenue to remain flat or dip slightly to a range between 16 6 billion and 17 billion Global Copaxone sales that reached 1 5 billion in 2019 are expected to slip to 1 2 billion in 2020
On the bottom line the company thinks free cash flow could decline slightly and land in the 1 8 billion to 2 2 billion range That s would still be enough to allow it to put another big dent in its debt which finished 2019 at 5 3 times earnings before interest taxes depreciation and amortization EBITDA In 2020 Teva expects to bring its debt load below 5 0 times EBITDA |
XOM | Oil slips as dollar strengthens but traders eye Nigerian outages | By Devika Krishna Kumar NEW YORK Reuters Oil prices slipped on Friday ending a three day rally as a strong dollar weighed and investors cashed in on recent gains but losses were cushioned by outages in Nigeria that have slashed output to the lowest in over two decades The dollar DXY was at a more than two week high against a basket of currencies weighing on greenback denominated commodities such as oil futures and making fuel imports more expensive for countries using other currencies and potentially hitting demand USD FRX OPEC pumped 32 44 million barrels per day bpd in April it said in a monthly report citing secondary sources up 188 000 bpd from March This is the highest since at least 2008 according to a Reuters review of past OPEC reports The group signalled the global oil glut may increase this year as surging output from its members makes up for losses from other countries whose production has been hit by low prices Prices were also pressured as investors locked in profits as oil headed for its fifth week of gains in the last six weeks and ahead of a long weekend in several countries in Europe including Germany and France Brent crude futures LCOc1 were down 20 cents at 47 88 a barrel by 11 57 a m ET 1557 GMT U S West Texas Intermediate crude futures CLc1 fell 43 cents to 46 27 The market sentiment remains biased to the upside supported by a growing view that the global oil complex is already in a rebalancing pattern Dominick Chirichella senior partner at the Energy Management Institute in New York The markets were boosted earlier after Exxon Mobil Corp N XOM declared force majeure on exports of Nigeria s largest crude grade as a portion of production had been curtailed following damage to a pipeline by a drilling rig Output from Africa s largest oil producer has fallen to 1 65 million barrels per day bpd due to militant attacks Finance Minister Kemi Adeosun said from 2 2 million bpd Petromatrix oil analyst Olivier Jakob said Nigerian production was unlikely to be much above 1 million bpd excluding condensates We expected more supply disruptions out of Nigeria this week but the pace of new supply problems from that country beats our expectations he said Unplanned oil supply outages have risen this month to the highest in at least five years because of wildfires in Canada and further losses in Nigeria and Libya ongoing outages in Canada where wildfires forced the closure of oil sands facilities and declarations of force majeure from at least four major oil firms U S investment bank Jefferies estimated the wildfires may have temporarily shut in as much as 1 4 million bpd of production and assuming there is no pipeline damage it will take weeks to ramp production |
XOM | Exclusive Iraq oil projects face delays as companies resist spending cuts | By Ahmed Rasheed BAGHDAD Reuters International oil firms have warned Iraq that projects to increase its crude output will be delayed if the government insists on drastic spending cuts this year a senior Iraqi oil official said on Friday Oil companies helping Iraq develop its massive oil fields effectively perform a role similar to oil service firms in that they have to clear spending with the government each year They are then repaid with crude oil produced from existing fields The arrangement worked smoothly when oil prices were above 100 a barrel but since crude has collapsed to 40 a barrel Iraq has been struggling to find enough oil to repay the companies for their investment Iraq relies on oil for nearly all its revenues and is spending heavily to fight Islamic State in its northern and western provinces With its finances stretched Iraq has asked foreign oil companies to rein in their budgets for developing the country s oil resources for a second year in a row but the two sides have failed so far to agree on spending levels The Iraqi government request was contained in Oil Ministry letters seen by Reuters to BP L BP Royal Dutch Shell L RDSa Exxon Mobil N XOM Eni MI ENI Lukoil MM LKOH and Petronas UL PETR There has been no agreement so far with the foreign companies on the proposed budgets and that is causing delays in all key oil field projects said the Iraqi official adding that the talks were continuing The government has also argued that prices for goods and services have fallen steeply during the market downturn so oil companies should be getting less Some companies however have complained that the proposed budgets may prevent them from continuing operations in Iraq the official said giving no details He said BP Shell and Lukoil have already objected to the proposed investment budgets Iraq s outgoing Oil Minister Adel Abdel Mahdi had said in February that the budget for foreign oil company development costs had been revised down to just over 9 billion in 2016 from 23 billion following complex negotiations Among OPEC members Iraq s supply rose last year and output reached a record 4 775 million barrels per day in January 2016 SPENDING AND PRODUCTION TARGETS According to a summary of Iraq s proposals seen by Reuters BP has been asked to cut its 2016 budget to 2 48 billion and target output of 1 4 million barrels per day bpd at the Rumaila field it operates BP proposed a budget of 3 25 billion for 2015 though the amount agreed with Iraq may have differed Lukoil is expected to cut spending to 1 26 billion and aim for a production of 400 000 bpd at the West Qurna 2 project The Russian company proposed a 2015 budget of 2 1 billion Eni should cut spending to 1 62 billion and aim for production of 351 000 bpd at the Zubair field The Italian firm said in February it would cut spending by 20 percent across the board this year without specifying the size of cuts in Iraq ExxonMobil was asked to slash spending to 878 million and aim for output of 379 000 bpd at the West Qurna 1 project Last year the U S company insisted on spending 1 8 billion Shell should cut spending to 855 million and aim for a 200 000 bpd from the Majnoon field Last year it proposed a budget of 1 5 billion Petronas should reduce costs to 712 million and target production of 100 000 bpd from the Garraf field
The oil companies in question either declined to comment or had no immediate comment |
XOM | U S top court rejects Exxon appeal in groundwater contamination case | By Lawrence Hurley WASHINGTON Reuters The U S Supreme Court on Monday rejected Exxon Mobil Corp s N XOM appeal of a 236 million judgment against the oil company in a case brought by the state of New Hampshire over groundwater contamination linked to a gasoline additive The justices left in place the New Hampshire Supreme Court s 2015 ruling upholding the judgment by a jury that in 2013 spurned Exxon s claims that the contamination linked to its fuel additive was not its fault but rather the fault of the local gas stations and storage facilities that spilled it Exxon argued in its appeal that its due process rights were violated because New Hampshire had not proved the company s liability for the alleged pollution at each individual site The additive at the center of the case is called methyl tertiary butyl ether or MTBE It is an oxygen containing substance that was added to gasoline to promote more complete combustion and reduce air pollution It was one of several additives that had been recommended by regulators to reduce emissions but has now largely been phased out of the U S fuel supply because of the hazard it poses to groundwater New Hampshire s lawsuit against Exxon headquartered in Irving Texas dates back to 2003
State officials called the 236 million judgment the largest MTBE related verdict since states and other agencies began making claims for remediation and other damages Exxon said in court papers it is the largest ever jury verdict in New Hampshire In 2014 Exxon also appealed to the U S Supreme Court a 105 million jury verdict in favor of New York City over MTBE contamination but the court declined to hear the case The case is Exxon Mobil v New Hampshire U S Supreme Court No 15 933 |
MRO | Why Is Marathon Oil MRO Down 4 1 Since Last Earnings Report | A month has gone by since the last earnings report for Marathon Oil MRO Shares have lost about 4 1 in that time frame underperforming the S P 500
Will the recent negative trend continue leading up to its next earnings release or is Marathon Oil due for a breakout Before we dive into how investors and analysts have reacted as of late let s take a quick look at the most recent earnings report in order to get a better handle on the important drivers Marathon Oil Q3 Earnings and Revenues Beat EstimatesMarathon Oil Corporation NYSE MRO reported stellar third quarter 2019 results wherein both earnings and revenues surpassed the respective Zacks Consensus Estimate Better than expected net sales volumes led to this outperformance Precisely the same totalled 427 thousand barrels of oil equivalent per day MBOE d topping the Zacks Consensus Estimate of 394 MBOE d Its adjusted income from continuing operations came in at 14 cents per share outpacing the Zacks Consensus Estimate of 4 cents However the metric plunged nearly 42 from the year ago earnings of 24 cents Notably decreased average price realizations of crude oil and condensate from the International E P segment induced this year over year fall However quarterly revenues of 1 345 million beat the Zacks Consensus Estimate of 1 264 million But the top line was 19 3 lower than the prior year figure of 1 667 million Segmental PerformanceThis Texas based energy explorer s total net production from U S and International units in the quarter under review came in at 426 000 BOE d compared with 419 000 BOE d in the year ago period U S E P This U S upstream unit earned a profit of 180 million down 10 4 from the year ago figure of 201 million due to weak crude oil and condensate price realizations in the United States Production costs came in at 4 75 per BOE hitting the lowest quarterly average unit cost level since 2011 and representing a 23 year over year decline Net production available for sale of 339 000 BOE d increased from 304 000 BOE d in third quarter 2018 The total U S output comprised 47 oil or 201 000 barrels per day bpd up 16 2 year over year This was also marginally higher than the company s guided range of 190 000 200 000 bpd The improved year over year production especially from Bakken Northern Delaware and Oklahoma aided the company s quarterly performance Notably Bakken output came in at 109 000 BOE d mirroring a 28 23 rise from the year ago level While the Northern Delaware region recorded production of 30 000 BOE d surging 42 85 from third quarter 2018 Also output from Oklahoma came in at 84 000 BOE d compared with 73 000 BOE d in the year ago quarter Marathon Oil s average realized liquids prices crude oil and condensate of 55 09 per barrel was below the year earlier level of 68 51 Moreover natural gas liquids average price realizations tumbled 59 5 to 11 37 a barrel Additionally average realized natural gas prices dropped almost 25 year over year to 1 92 per thousand cubic feet International E P Income decreased from 116 million in the prior year period to 43 million in the third quarter due to lower production and weak commodity price realizations Marathon Oil reported production available for sale of 87 000 BOE d down from 115 000 Boe d in third quarter 2018 Moderate output from Equatorial Guinea along with the company s exit from Libyan operations caused this downside Marathon Oil s average realized liquids prices crude oil and condensate of 46 04 per barrel reflects a 28 15 decline from the year earlier quarter Natural gas and natural gas liquids average price realizations came in at 24 cents per thousand cubic feet and 1 a barrel respectively In turn the numbers account for a 52 and 51 year over year fall each Costs Capex Balance SheetTotal costs in the quarter were 1 108 million below 1 244 million in the prior year period Marathon Oil s capital expenditure summed 646 million Additionally the company generated organic free cash flow FCF of 81 million with the year to date FCF amounting to 298 million Marathon Oil has repurchased 300 million of shares year to date It also paid out 122 million as dividends As of Sep 30 it had cash and cash equivalents of 1 165 million and long term debt of 4 903 million Debt to capitalization ratio of the company was 28 5 GuidanceMarathon Oil s 2019 capital expenditure is intact at 2 4 billion For the ongoing year the company raised its U S oil production guidance to 13 from 12 expected previously It also lifted its total production guidance to 11 from 10 guided earlier Total U S oil output for the fourth quarter is anticipated in the band of 190 000 200 000 bpd International oil production is likely to be within 12 000 16 000 bpd amid divestment of the U K and Kurdistan assets
How Have Estimates Been Moving Since Then
It turns out fresh estimates have trended upward during the past month The consensus estimate has shifted 27 27 due to these changes
VGM Scores
Currently Marathon Oil has an average Growth Score of C a grade with the same score on the momentum front However the stock was allocated a grade of A on the value side putting it in the top quintile for this investment strategy
Overall the stock has an aggregate VGM Score of B If you aren t focused on one strategy this score is the one you should be interested in
Outlook
Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising Notably Marathon Oil has a Zacks Rank 3 Hold We expect an in line return from the stock in the next few months |
MRO | Is Marathon Oil MRO Stock Undervalued Right Now | The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks Nevertheless we know that our readers all have their own perspectives so we are always looking at the latest trends in value growth and momentum to find strong picks
Considering these trends value investing is clearly one of the most preferred ways to find strong stocks in any type of market Value investors use tried and true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels
Luckily Zacks has developed its own Style Scores system in an effort to find stocks with specific traits Value investors will be interested in the system s Value category Stocks with both A grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now
One company to watch right now is Marathon Oil MRO MRO is currently sporting a Zacks Rank of 2 Buy and an A for Value
Another valuation metric that we should highlight is MRO s P B ratio of 0 89 Investors use the P B ratio to look at a stock s market value versus its book value which is defined as total assets minus total liabilities MRO s current P B looks attractive when compared to its industry s average P B of 1 31 Within the past 52 weeks MRO s P B has been as high as 1 26 and as low as 0 73 with a median of 0 92
Finally our model also underscores that MRO has a P CF ratio of 3 32 This metric takes into account a company s operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook This stock s P CF looks attractive against its industry s average P CF of 4 05 Over the past year MRO s P CF has been as high as 4 64 and as low as 2 71 with a median of 3 35
These are just a handful of the figures considered in Marathon Oil s great Value grade Still they help show that the stock is likely being undervalued at the moment Add this to the strength of its earnings outlook and we can clearly see that MRO is an impressive value stock right now |
MRO | Will World Fuel INT Sustain Its Solid Momentum In 2020 | World Fuel Services NYSE INT is likely to retain its growth trajectory in 2020 courtesy of impressive earnings performance in 2019 and robust key end markets Buoyed by these factors this Zacks Rank 2 Buy stock has skyrocketed 104 1 in the past year compared with the s 5 3 growth Growth DriverThe company is one of the leading fuel suppliers in the three primary transportation segments marine aviation and land World Fuels recently announced that it will acquire Universal Weather and Aviation s UVair fuel business worth 170 million The UVair acquisition will complement World Fuel s aviation operations and also add customers Per the agreement Universal Weather and Aviation will collaborate with World Fuels to supply fuel to their respective clients Being in similar business and sharing some of the airports the parties collaboration is anticipated to be less risk prone with higher chances of outperformance The Miami based global provider of fuel logistics is well positioned to capitalize on growth and M A opportunities courtesy of a balance sheet and cash flow perspective Further the company is set to experience a sequential improvement in its U K and Kinetic business activities during the fourth quarter These growth drivers strengthen World Fuel s share in the fuel market especially in the United States Estimate RevisionsAnalysts are bullish on the stock as it has been witnessing solid upward estimate revisions In the past 90 days the Zacks Consensus Estimate for the company s 2019 and 2020 earnings has moved up 4 18 and 0 34 respectively Upbeat Q3 PerformanceThe stock has a great record of positive earnings surprises surpassing the Zacks Consensus Estimate in the last four quarters In its last earnings report on Oct 30 2019 World Fuel reported adjusted earnings per share EPS of 77 cents that beat the consensus mark of 69 cents The bottom line figure increased 22 2 on a year over year owing to higher income generated from the operations of aviation land and marine segments Impressive Growth ProjectionsThe Zacks Consensus Estimate for World Fuel s 2019 earnings is currently pegged at 2 49 which suggests growth of 18 00 from the year ago period s figure The same for 2020 is pegged at 2 92 which indicates year over year rise of almost 17 5 Positive Earnings Surprise HistoryWorld Fuel Services outpaced the Zacks Consensus Estimate in the trailing four quarters the average being 16 20 World Fuel Services Corporation Price and EPS Surprise Strong Balance SheetIn the third quarter the company generated cash and cash equivalents of 218 5 million Notably it s debt to capitalization ratio was 26 7 The company managed to lower its net debt to EBITDA ratio to 1 44 times down from 1 49 times in the year ago quarter We believe that these factors will continue to keep World Fuel in investors good books Other Key PicksSome other top ranked players in the space are Magellan Midstream Partners L P NYSE MMP Kosmos Energy Ltd NYSE KOS and Marathon Oil Corporation NYSE MRO All of these stocks carry a Zacks Rank 2 You can see 7 Best Stocks for the Next 30 DaysJust released Experts distill 7 elite stocks from the current list of 220 Zacks Rank 1 Strong Buys They deem these tickers Most Likely for Early Price Pops Since 1988 the full list has beaten the market more than 2X over with an average gain of 24 6 per year So be sure to give these hand picked 7 your immediate attention |
XOM | Getting Paid To Be In The Market | The theme of the last 12 hours has been lower volatility and naturally traders and investors have been asking whether we are in for a prolonged period of low volatility
Looking at the US volatility index the Vix we can see implied volatility in the S P 500 has fallen 4 6 to 16 88 however this is still in line with the 12 month average The ASX volatility index has also pulled back in the last few days to 20 but again this is still hovering around the 12 month average and a 17 premium to the 5 year average
AUD The perfect storm
One just has to look at the price action in the S P 500 last night where we saw the index trade in a 18 point range while the Dow traded in a lowly 134 point range Low volatility and positively trending equity markets the S P 500 closed on the day s high means hunting for yield and being paid to be in a position That was seen clearly in the Aussie banks yesterday With such bullish price action front and center in the FX markets the AUD is now looking really strong
AUD USD has drifted to the 0 7300 area but the real action is in the crosses where EUR AUD and AUD JPY are moving far more aggressively on a risk adjusted basis Investors can pick up a 1 85 yield in an Australian 2 year bond relative to a negative 55 basis point yield in the German bund and a negative yield out to 10 years in Japan so naturally this favors the AUD In fact adjust bonds for inflation and one can still get a positive real return in Australia if we push further out the maturity curve The greatest risk for the AUD one senses is renewed CNY weakness
There are not many economies who can say that so in times of lower volatility reach for the AUD If the RBA ever really wanted to get the AUD down they would need to flatten the yield curve aggressively This isn t going to happen
Australia January trade data is released at 11 30 Expectations are for a modest improvement in the trade deficit consensus A 3 2 billion although I suspect the AUD won t be hugely sensitive to the print
When we consider the ongoing rate hold at the RBA and another 2 rally in the iron ore price overnight you then have the perfect recipe for AUD appreciation Take a look at the daily chart of high grade copper as well which often leads the Aussie The bulls are fully in control of this move and the trend is certainly your friend It goes hand in hand with the steeping of the fixed income curve in Australia and the US i e the world is not such a bad place
The ASX 200 to test recent highs again
The ASX 200 will naturally feed off the US lead but should be supported given the underlying strength our call is for 5040 Japanese markets will likely open modestly lower so if we see traders look to support this index from the initial fall it could support S P futures which in turn should be beneficial for Australian equities I do feel that moves to 5055 on the ASX 200 will be faded should we get there today as the trend is still sideways and conditions dictate that two standard deviations from the 20 day moving average could result in mean reversion A close above the February 23 high of 5037 would be positive though
Oil has been fairly whippy but the net effect is a modestly higher price with US oil currently trading at the top end of its multi month range Sizeable conflicting forces were at hand with a sizeable 10 37 million barrel increase to inventories reported by the EIA relative to a strong 6 million decline in production Exxon NYSE XOM reducing output is certainly aiding this bid in oil Aussie oil plays should do nicely on open while BHP should open 3 higher based off its ADR s performance
China will be a key focus and many will be preparing for this weekend s National People s Congress Traders economists and investors will be primarily focused on the GDP target for 2016 where all the talk has been that they will set a 6 5 to 7 growth target Today s CNY fix could be a focal point and will get more attention with the market devoid of a strong lead In the US we get jobless claims factory orders durable goods and the highlight will be services PMI After a strong ADP payrolls report last night 214 000 keep an eye on the employment sub component as this is the best lead for Fridays payrolls report consensus 195 000 |
XOM | Oil Shaking It Off | Crude oil prices shook off a 10 4 million barrel increase in a stunning change in recent market sentiment The action suggests that the market is getting more convinced that we are near a market bottom due to more signs of falling oil production and the potential for a production freeze With Saudi Arabia looking to brow billions of dollars and Exxon Mobil NYSE XOM lowering its production outlook it is clear that the biggest players in the energy space are feeling the pain of lower oil prices and they are being forced to take action
The Financial Times reports that Exxon Mobil expects its production in 2020 to be roughly the same as last year as cuts in investment prompted by the low price of crude oil force the group to abandon its earlier projections of growth Exxon said it expected production in 2020 to be between 4m and 4 2m barrels of oil equivalent per day That is lower than the projection Exxon set out a year ago when it expected output would average 4 3m barrels per day in 2017
Oil also got support after Reuters reported that Saudi Arabia has asked banks to provide it with loans of up to 10 billion Apparently Saudi Arabia sent out feelers to banks to discuss a loan but did not say how large the loan might be Unnamed sources said it could be as high as 10 billion dollars Saudi Arabia also cut back billions of dollars in aid to Lebanon which the New York Times says opens the door to Iran to insert its influence
With the major players feeling the pain it is clear why OPEC and non OPEC are getting close to an agreement on a production freeze The FT reported that Russian President Vladimir Putin is backing the plan to freeze output and some of the world s largest producers might agree hold output steady They quote Mr Putin as saying on the whole an agreement was reached that we will keep 2016 oil output at the January level Putin said commenting on a meeting with Russian oil producers at the Kremlin earlier in the week The FT also reported that Venezuela s oil minister Eulogio del Pino said more than 15 countries were preparing to attend a meeting to discuss a possible output freeze So with the producers showing restraint and big and small oil companies cutting back the time of market balance may soon be at hand
This is almost astounding considering the fact that the supplies oil of in the U S are at the highest level since the great depression Yet there are signs that demand is also very strong The crude oil refinery inputs averaged about 15 9 million barrels per day during the week that is 167 000 barrels per day more than the previous week Refineries operated at 88 3 of their operable capacity last week And while gasoline production decreased last week it was still averaging an impressive 9 3 million barrels per day Distillate fuel production increased last week averaging 4 8 million barrels per day
Gas demand over the last four weeks averaged about 9 3 million barrels per day up by 6 9 from the same period last year Distillate fuel demand averaged over 3 4 million barrels per day over the last four weeks down by 18 8 from the same period last year Darn global warming
We continue to see this as a historic time for oil We seem to be in the final phase of a bust cycle Start positioning for the long term boom Look down the curve with futures and options With gasoline refiners saying that they will slow production of gasoline we should get our seasonal gasoline rally right on schedule Spring must be coming |
XOM | Oil Price Movement Detached From Stockpiles | The latest reports on surging stockpiles of crude have not had a deterring effect on inclining oil prices in either popular benchmark Inventory builds unseen within the last 11 months even when followed by news of 2 60 slides in total US output during the last twelve months saw the WTI and Brent stay floating at relatively high prices The Department of Energy report illustrated that producers are slowly dwindling due to price competition as evidenced by their latest production matching levels last seen in November of 2014 The US market is adjusting itself well to these circumstances however with downstream producers increasing efficiency and output pace to the highest rates witnessed in the last decade The official data also lends credence to the reality that stockpiles will soon overwhelm inventories with Genscape reporting onshore storage levels at over 500 million barrels and the storage facility at Cushing seeing deposits in 16 of the last 17 weekly readings
Lately some of the only reasons for oil s increase in price are sourced from trends in the United States with other countries involved mostly responsible for downward pressures Russia Saudi Arabia and Venezuela s pact to freeze oil production at January levels is unworthy of mention due to the extremely high output seen in January and lack of enforceability Moreover Iran has increased their own production by 500 000 barrels a day within the last month alone Any gaps left by others will likely be taken by Iranian oil as the country is hungry to fill demand that was unavailable during their recent period of sanctions Somewhat of a balance has been found in oil s price lately though trends have largely persisted as normal since the original drop with current WTI futures suggesting that oil is unlikely to reach 50 00 per barrel until 2023 Perhaps some of the recent gains past the 30 00 handle will be given up soon as even oil giants like Exxon Mobil NYSE XOM are cutting every possible cost to be more competitive in a low price environment As storage quickly approaches 80 of total capacity it is likely to be the next informer of oil momentum in the near future |
XOM | Aubrey McClendon A Capitalist s Hero Or Villain | It s tough to sort the bad guys from the good guys especially when there s money involved
We all like to think we re good at it We meet somebody or watch an interview and instantly slap a label on them But so often we re dead and dangerously wrong
As the nation becomes disgustingly obsessed with the presidential election most Americans have no idea they lost a very powerful man last week He s a man that directly affected all of our lives
He affected our wallets the economy our portfolios and the workforce
He did far more than even the most powerful of politicians And yet the average investor let alone the ordinary citizen has no idea
As investigators work to find out exactly what killed Aubrey McClendon we can t help but ask a tough question Was the man a hero or a villain
From the start it s clear we re going to be painting in shades of gray
Those who knew the founder and former CEO of Chesapeake Energy NYSE CHK would agree he was a tremendous risk taker He was one of the wildest of wildcatters
What s incredible though is how exorbitantly our capitalist system rewarded him for his good decisions and how efficiently it punished him for his bad ones
The underlying rule of the capitalist system and therefore wealth building is that you will be richly rewarded for giving folks a product or service they want and are willing to pay for
McClendon did it in spades
In 1989 he and a partner pooled their cash and started Chesapeake Energy McClendon was just 29 years old
But what he lacked in experience he made up for with an immense competitive spirit
The new company was an immediate and tremendous success Just four years after founding it McClendon took his company public And over the following three years his shareholders more than tripled their money Shares soared over 270
And the moneymaking trend had legs
In 2011 Forbes formally inducted McClendon into its prestigious 20 20 Club He became just one of eight CEOs who delivered annualized returns of more than 20 for 20 straight years an incredible feat
McClendon not only started a successful company but he made his fellow shareholders rich
Even more he created jobs At its peak Chesapeake Energy was issuing paychecks to more than 13 000 employees
As his company perfected the technology that allowed it to tap into tight shale formations Chesapeake grew its gas production from 5 million to 2 5 billion cubic feet per day through 2013
Only Exxon Mobil NYSE XOM produced more gas
But the story goes much further than Chesapeake McClendon lit a fire under an entire industry He s often thought of as the father of modern fracking
At the same time McClendon and his crew were leasing land all across the country his competitors were doing the same They took advantage of Chesapeake s technology and drilled countless wells of their own
Tens of thousands of jobs were spurred
It s not hard to say McClendon was the pioneering force in America s energy boom He s a chief reason we re no longer dependent on foreign energy
He did what no politician could do and he didn t need bombs to do it
Thanks to the power of the capitalist system McClendon changed the face of America made us safer freer and richer all while building himself an incredible fortune
If only the story stopped there
If you ve been following the news this week you know McClendon was charged on Tuesday with conspiring to rig land lease deals On Tuesday just hours before he was due in court he died in a fiery rather suspicious car accident
If found guilty of the charges the man who piloted an industry could have done serious jail time
Of course this week s controversy wasn t the first time the energy pioneer found himself in trouble
As we said McClendon was a risk taker no risk was too big In fact we re told it was hard to get the man to say no to almmost any idea a great trait in a pioneer a tough trait for stability
His passion for risk cost him much of his fortune in 2008 Despite the fact that his compensation package that year topped out at a monstrous 112 million the risk taker wanted more His competitive spirit wouldn t rest
He was punished for it
Over the several years prior to the 2008 meltdown he had leveraged his stake in Chesapeake to immense proportions When Chesapeake s shares fell significantly in the maelstrom of the times it forced an impossible margin call for the highly leveraged McClendon He lost most of his stake in the company
Worse Carl Icahn s forceful activist hand eventually pushed the daredevil McClendon out of his job
In all the crisis cost the king of natural gas some 559 million His reputation was permanently spoiled
But should we judge McClendon merely by his personal finances and his immense tolerance for risk After all he pioneered an industry created tens of thousands of jobs and made his shareholders rich
There s no doubt the man had a greedy competitive side that purely speculating may have cost him his life this week But McClendon did incredible economic good far more than Yellen Obama or any politician could dream of
He created an energy boom revitalized Oklahoma City created countless jobs and changed the landscape of the energy industry across the planet
He had an incredible life But hero or villain You tell me
Nobody is purely one or the other
Our capitalist system is a funny beast It doesn t sort good people from bad It merely shows us who s a better allocator of capital who can deliver the best product to the most people
McClendon did it incredibly well No doubt he was a great capitalist He changed the world
Only the history books will tell us if he went too far |
XOM | If API Controls Oil Information Where s The Open Market | This is for all of the energy junkies out there and you know who you are who follow every dip and swing in the oil market can name a dozen shale oil producers and have a personal prediction about when if ever the alternative energies will really disrupt
A curious incident occurred this week as reported by the Wall Street Journal Twitter NYSE TWTR deleted a series of tweets from oil traders because the American Petroleum Institute API claimed the tweets contained information from API reports that are only available to paying customers API considers this data concerning oil inventory levels in the United States protected by copyright laws The problem is that this data which is released weekly on Tuesdays can and does move the market in the short term according to the Wall Street Journal analysis which says it is used by investors as a guide ahead of the U S government statistics which are released on Wednesdays
API is best described as an industry activist group It advocates on behalf of the petroleum industry lobbies for the petroleum industry in Washington produces nationally televised political ads for the industry creates research and reports on behalf of the industry and is funded by the industry This means we have an extremely interested party releasing information weekly that moves the market But there is more The API charges for access to this market moving information and aggressively fights its dissemination to the general public unless that public is willing to pay In other words market moving information produced by an interested party is selectively released and kept hidden from all but the customers Where s the open market there
It is no wonder that major energy producers especially those outside the U S ignore and largely disdain the short term speculative energy markets Back in 2008 Ali al Naimi Saudi Arabia s oil minister criticized speculators and the distortions they create in the market saying speculators bore significant responsibility for the sharp increase in oil prices in the last few years in a cable to the U S State Department In a speech at the 2011 HIS CERAWeek conference Naimi attacked speculators publicly for causing market volatility
The largest energy producers be they national entities in the Middle East Russia or South America or multinationals like Exxon NYSE XOM or BP PLC NYSE BP actually own resources They are in it for the long term no matter what For them short term speculation sometimes based on nothing more than a weekly API report is a nuisance So the next time you try to understand the strategy of Rex Tillerson or Ali al Naimi remember that they do not and cannot afford to take to heart the short term speculation and fickly daily swings in energy prices like energy junkies do |
XOM | No intruder found after search at Exxon Baytown Texas refinery | HOUSTON Reuters A seven hour search for a possible intruder into Exxon Mobil Corp s N XOM Baytown Texas complex which includes the nation s second largest crude oil refinery yielded no results a spokesman for the Harris County Sheriff s Office said on Saturday
Operations at the Baytown refinery and adjoining chemical plants were not affected by the search Exxon said
The facilities continue to operate at normal rates said Exxon spokesman Todd Spitler
The Houston Chronicle reported on its website that a man with a backpack was thought to have climbed over one of the Exxon security gates
Employees were required to remain inside buildings in parts of the complex
To ensure the safety and security of our personnel we implemented our site security plan in portions of our complex today Spitler said Working with law enforcement expertise the majority of the work force has been released back to work
Dogs were used in the search of the complex after the intruder was reported at about 7 30 a m CDT 1230 GMT said Harris County Sheriff s Office spokesman Thomas Gilliland
Originally a male was thought to have trespassed onto the property Gilliland said Canine units from HCSO were utilized but no positive contact was made on any male No contact was made with anyone and no substantiated claims were ever found
The Baytown refinery was the site a large fire that spread black smoke over a large part of northeast Harris County on Thursday There were no injuries due to the blaze
U S refineries and chemical plants beefed up security following the Sept 11 2001 attacks |
XOM | Less than 5 percent of Saudi Aramco to be sold | KHOBAR Saudi Arabia Reuters Saudi Arabia plans to sell less than 5 percent of its state oil company Saudi Aramco SDABO UL through an initial public offering IPO Deputy Crown Prince Mohammed bin Salman said on Monday He said in a television interview he expected Aramco the world s biggest energy company to be valued at more than 2 trillion and that he wanted it to be transformed into a holding company with an elected board Subsidiaries of the company would also be sold by IPO as part of a privatization drive and to bring more transparency to the oil giant Prince Mohammed said If one percent of Aramco is offered to the market just one percent it will be the biggest IPO on earth he said Aramco was once run by Americans but has long been a Saudi state corporation It dwarfs all in the industry with crude reserves of 265 billion barrels more than 15 percent of global oil deposits It produces more than 10 million barrels per day three times as much as the world s largest listed oil company ExxonMobil NYSE XOM while its reserves are more than 10 times bigger If Aramco were ever to go public it would probably become the first company to be valued at more than 1 trillion Less than 5 percent from the parent company we are trying to separate it and make Aramco a holding company Prince Mohammed said The listing of Aramco would be on the Saudi stock market he said adding that one idea being studied was to set up a fund in the U S market which would buy shares in Aramco to help bring liquidity
It is not clear which of Aramco s ventures might be involved in a sale but the range of candidates is wide Aramco and its subsidiaries own or have an equity interest in more than 5 million barrels per day of refining capacity |
XOM | Exxon ups dividend 3 percent day after ratings downgrade | By Ernest Scheyder HOUSTON Reuters Exxon Mobil Corp NYSE XOM raised its quarterly dividend by 3 percent on Wednesday a day after Standard Poor s downgraded the U S oil and gas company citing its generous payouts to shareholders It was the smallest increase since at least the first quarter of 2006 when the dividend rose 10 percent according to Thomson Reuters data The downgrade of the oil giant was the first by S P in more than 70 years It was flagged by the ratings agency last week and did not come as a surprise Wednesday morning as Exxon s board met to approve the dividend increase and review quarterly results which are set to be released on Friday The board had halted a massive share repurchase program on Feb 2 the same day S P warned publicly a downgrade was possible The repurchase program had dwarfed the dividend payout for years and its cancellation was the first sign by Exxon s board of less generous remuneration to shareholders Exxon has raised its dividend each of the past 34 years The increase this year came as the company and its peers are fighting the perception they spend too much on shareholders and not enough strengthening its balancing sheet and building oil reserves Filings with U S regulators show that at a combined 325 billion in dividends and repurchases Exxon s spending on shareholders in the last 11 years has exceeded by nearly 20 percent its outlays of 271 7 billion for new property plant and equipment over the same period S P on Tuesday cut Exxon s top tier credit rating by one notch to AA from AAA saying it was concerned the world s largest publicly traded oil company would rather enrich shareholders than cull debt Exxon raised its payout to 75 cents from 73 cents The dividend will be payable on June 10 to shareholders of record as of May 13
Shares of Exxon gained 0 8 percent to close Wednesday at 88 46 per share |
XOM | Exxon Mobil profit beats expectations on big cost cuts | By Ernest Scheyder HOUSTON Reuters Exxon Mobil Corp NYSE XOM the world s largest publicly traded oil producer reported a higher than expected first quarter profit on Friday as it slashed costs to offset plunging crude prices and weak refining margins The results reflect the new reality for an oil industry hammered by a more than 60 percent drop in crude prices since 2014 that has forced radical reductions in spending and personnel Exxon s capital budget during the first quarter dropped 33 percent from a year earlier reflecting a drive to survive a price downturn that has already cost the company a perfect credit rating Exxon reported net income of 1 81 billion or 43 cents per share down from 4 94 billion or 1 17 per share a year earlier Analysts on average expected earnings of 31 cents per share according to Thomson Reuters I B E S Shares of Irving Texas based Exxon rose 0 6 percent to 88 60 in premarket trading Exxon Chief Executive Officer Rex Tillerson cited the company s large size and cash flow for helping it weather the low prices The organization continues to respond effectively to challenging industry conditions Tillerson said in a news release Production rose 2 percent to 4 3 million barrels of oil equivalent per day Exxon s oil and gas production arm lost money in the United States during the quarter The company operates in North Dakota Texas and other parts of the country Internationally profit at the oil and gas production arm fell 74 percent The company s refining unit s profit fell 45 percent due to weak margins unusual as these operations tend to perform better during periods of low oil and gas prices Exxon earlier this week had raised its dividend by 3 percent one of the smallest increases in years Historically increases have ranged from 5 percent to 10 percent or more During the first quarter Exxon spent more on its dividend than it earned
The dividend increase came the day after Standard and Poor s slashed the company s sterling credit rating by one notch to AA citing concern about Exxon s quarterly payout to shareholders |
MRO | Is Marathon Oil MRO A Profitable Pick For Value Investors | Value investing is easily one of the most popular ways to find great stocks in any market environment After all who wouldn t want to find stocks that are either flying under the radar and are compelling buys or offer up tantalizing discounts when compared to fair value One way to find these companies is by looking at several key metrics and financial ratios many of which are crucial in the value stock selection process Let s put Marathon Oil Corporation NYSE MRO stock into this equation and find out if it is a good choice for value oriented investors right now or if investors subscribing to this methodology should look elsewhere for top picks PE Ratio A key metric that value investors always look at is the Price to Earnings Ratio or PE for short This shows us how much investors are willing to pay for each dollar of earnings in a given stock and is easily one of the most popular financial ratios in the world The best use of the PE ratio is to compare the stock s current PE ratio with a where this ratio has been in the past b how it compares to the average for the industry sector and c how it compares to the market as a whole On this front Marathon Oil has a trailing twelve months PE ratio of 12 26 as you can see in the chart below This level actually compares pretty favorably with the market at large as the PE for the S P 500 stands at about 18 01 If we focus on the long term PE trend Marathon Oil s current PE level puts it below its midpoint over the past five years Further the stock s PE compares favorably with the Zacks Oil Energy sector s trailing twelve months PE ratio which stands at 12 97 At the very least this indicates that the stock is relatively undervalued right now compared to its peers We should also point out that Marathon Oil has a forward PE ratio price relative to this year s earnings of just 14 75 which is tad higher than the current level So it is fair to expect an increase in the company s share price in the near term P S RatioAnother key metric to note is the Price Sales ratio This approach compares a given stock s price to its total sales where a lower reading is generally considered better Some people like this metric more than other value focused ones because it looks at sales something that is far harder to manipulate with accounting tricks than earnings Right now Marathon Oil has a P S ratio of about 1 69 This is lower than the S P 500 average which comes in at 3 18 right now Also as we can see in the chart below this is below the highs for this stock in particular over the past few years If anything MRO is in the lower end of its range in the time period from a P S metric suggesting some level of undervalued trading at least compared to historical norms Broad Value Outlook In aggregate Marathon Oil currently has a Zacks Value Score of A putting it into the top 20 of all stocks we cover from this look This makes Marathon Oil a solid choice for value investors What About the Stock Overall Though Marathon Oil might be a good choice for value investors there are plenty of other factors to consider before investing in this name In particular it is worth noting that the company has a Growth Score of A and a Momentum Score of C This gives MRO a Zacks VGM score or its overarching fundamental grade of A You can read more about the Zacks Style Scores Meanwhile the company s recent earnings estimates have been mixed at best The current year has seen five estimates go higher in the past sixty days compared to one lower while the full year 2020 estimate has seen five downward revision compared to one upward in the same time period This has had a notable impact on the consensus estimate though as the current year consensus estimate has increased by 7 in the past two months while the full year 2020 estimate has declined by 12 7 You can see the consensus estimate trend and recent price action for the stock in the chart below Marathon Oil Corporation Price and Consensus This somewhat mixed trend is why the stock has just a Zacks Rank 3 Hold and why we are looking for in line performance from the company in the near term Bottom Line Marathon Oil is an inspired choice for value investors as it is hard to beat its incredible line up of statistics on this front However with a sluggish industry rank among bottom 29 of more than 250 industries and a Zacks Rank 3 it is hard to get too excited about this company overall In fact over the past two years the Zacks Oil and Gas Integrated United States industry has clearly underperformed the market at large as you can see below So value investors might want to wait for estimates and analyst sentiment to turn around in this name first but once that happens this stock could be a compelling pick Looking for Stocks with Skyrocketing Upside Zacks has just released a Special Report on the booming investment opportunities of legal marijuana Ignited by new referendums and legislation this industry is expected to blast from an already robust 6 7 billion to 20 2 billion in 2021 Early investors stand to make a killing but you have to be ready to act and know just where to look |
MRO | Why Marathon Oil MRO Is Poised To Beat Earnings Estimates Again | If you are looking for a stock that has a solid history of beating earnings estimates and is in a good position to maintain the trend in its next quarterly report you should consider Marathon Oil MRO This company which is in the Zacks Oil and Gas Integrated United States industry shows potential for another earnings beat
This energy company has an established record of topping earnings estimates especially when looking at the previous two reports The company boasts an average surprise for the past two quarters of 262 88
For the last reported quarter Marathon Oil came out with earnings of 0 23 per share versus the Zacks Consensus Estimate of 0 11 per share representing a surprise of 109 09 For the previous quarter the company was expected to post earnings of 0 06 per share and it actually produced earnings of 0 31 per share delivering a surprise of 416 67
Price and EPS Surprise
For Marathon Oil estimates have been trending higher thanks in part to this earnings surprise history And when you look at the stock s positive Zacks Earnings ESP Expected Surprise Prediction it s a great indicator of a future earnings beat especially when combined with its solid Zacks Rank
Our research shows that stocks with the combination of a positive Earnings ESP and a Zacks Rank 3 Hold or better produce a positive surprise nearly 70 of the time In other words if you have 10 stocks with this combination the number of stocks that beat the consensus estimate could be as high as seven
The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter the Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change The idea here is that analysts revising their estimates right before an earnings release have the latest information which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier
Marathon Oil currently has an Earnings ESP of 4 17 which suggests that analysts have recently become bullish on the company s earnings prospects This positive Earnings ESP when combined with the stock s Zacks Rank 3 Hold indicates that another beat is possibly around the corner We expect the company s next earnings report to be released on November 6 2019
Investors should note however that a negative Earnings ESP reading is not indicative of an earnings miss but a negative value does reduce the predictive power of this metric
Many companies end up beating the consensus EPS estimate though this is not the only reason why their shares gain Additionally some stocks may remain stable even if they end up missing the consensus estimate
Because of this it s really important to check a company s Earnings ESP ahead of its quarterly release to increase the odds of success Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they ve reported |
MRO | Marathon Oil MRO Expected To Beat Earnings Estimates Should You Buy | Marathon Oil MRO is expected to deliver a year over year decline in earnings on lower revenues when it reports results for the quarter ended September 2019 This widely known consensus outlook gives a good sense of the company s earnings picture but how the actual results compare to these estimates is a powerful factor that could impact its near term stock price
The earnings report which is expected to be released on November 6 2019 might help the stock move higher if these key numbers are better than expectations On the other hand if they miss the stock may move lower
While the sustainability of the immediate price change and future earnings expectations will mostly depend on management s discussion of business conditions on the earnings call it s worth handicapping the probability of a positive EPS surprise
Zacks Consensus Estimate
This energy company is expected to post quarterly earnings of 0 04 per share in its upcoming report which represents a year over year change of 83 3
Revenues are expected to be 1 26 billion down 24 2 from the year ago quarter
Estimate Revisions Trend
The consensus EPS estimate for the quarter has been revised 62 07 lower over the last 30 days to the current level This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period
Investors should keep in mind that an aggregate change may not always reflect the direction of estimate revisions by each of the covering analysts
Earnings Whisper
Estimate revisions ahead of a company s earnings release offer clues to the business conditions for the period whose results are coming out This insight is at the core of our proprietary surprise prediction model the Zacks Earnings ESP Expected Surprise Prediction
The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate The idea here is that analysts revising their estimates right before an earnings release have the latest information which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier
Thus a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate However the model s predictive power is significant for positive ESP readings only
A positive Earnings ESP is a strong predictor of an earnings beat particularly when combined with a Zacks Rank 1 Strong Buy 2 Buy or 3 Hold Our research shows that stocks with this combination produce a positive surprise nearly 70 of the time and a solid Zacks Rank actually increases the predictive power of Earnings ESP
Please note that a negative Earnings ESP reading is not indicative of an earnings miss Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and or Zacks Rank of 4 Sell or 5 Strong Sell
How Have the Numbers Shaped Up for Marathon Oil
For Marathon Oil the Most Accurate Estimate is higher than the Zacks Consensus Estimate suggesting that analysts have recently become bullish on the company s earnings prospects This has resulted in an Earnings ESP of 4 17
On the other hand the stock currently carries a Zacks Rank of 3
So this combination indicates that Marathon Oil will most likely beat the consensus EPS estimate
Does Earnings Surprise History Hold Any Clue
While calculating estimates for a company s future earnings analysts often consider to what extent it has been able to match past consensus estimates So it s worth taking a look at the surprise history for gauging its influence on the upcoming number
For the last reported quarter it was expected that Marathon Oil would post earnings of 0 11 per share when it actually produced earnings of 0 23 delivering a surprise of 109 09
Over the last four quarters the company has beaten consensus EPS estimates four times
Bottom Line
An earnings beat or miss may not be the sole basis for a stock moving higher or lower Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors Similarly unforeseen catalysts help a number of stocks gain despite an earnings miss
That said betting on stocks that are expected to beat earnings expectations does increase the odds of success This is why it s worth checking a company s Earnings ESP and Zacks Rank ahead of its quarterly release Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they ve reported
Marathon Oil appears a compelling earnings beat candidate However investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release |
MRO | Higher Oil Production To Boost Chesapeake CHK Q3 Earnings | Chesapeake Energy Corporation NYSE CHK is expected to trump estimates when it releases third quarter 2019 results on Nov 5 before market open The oil gas exploration and production company beat earnings estimates twice in the trailing four quarters Chesapeake Energy Corporation Price and EPS Surprise Let s see how things have shaped up prior to the announcement Which Way are Estimates Headed Let s take a look at the estimate revision trend to get a clear picture of what analysts expect from the company prior to the earnings release The Zacks Consensus Estimate for third quarter loss per share has been revised downward over the past 30 days to 9 cents The figure suggests a year over year decline of 147 4 Further the Zacks Consensus Estimate for revenues of 1 2 billion suggests a 2 5 drop from the prior year quarter What Our Quantitative Model SuggestsOur proven model predicts an earnings beat for Chesapeake this time around This is because it has the right combination of a positive and a Zacks Rank 1 Strong Buy 2 Buy or 3 Hold Earnings ESP Chesapeake has an Earnings ESP of 8 24 The Zacks Consensus Estimate is pegged at a loss of 9 cents You can uncover the best stocks to buy or sell before they are reported with our Zacks Rank Cimarex currently carries a Zacks Rank 3 What is Driving the Better Than Expected Earnings The upstream company with 2 3 billion market cap has assets in prolific regions like Eagle Ford Marcellus and Haynesville shale plays which are expected to have boosted third quarter 2019 earnings The company has been focusing on increasing the proportion of oil in its gas weighted volume mix to reduce commodity price risk and stabilize earnings and cash flow This trait is expected to have continued in the third quarter and positively reflect on the upcoming results Markedly the Zacks Consensus Estimate for oil production is pegged at 11 36 million barrels MMbbls indicating an improvement from 8 MMbbls in the year ago quarter With higher oil output the Zacks Consensus Estimate for Chesapeake s third quarter 2019 oil sales is pegged at around 700 million suggesting an increase from 594 million a year ago Q2 PerformanceIn the last reported quarter Cimarex s adjusted loss of 10 cents per share was wider than the Zacks Consensus Estimate of a loss of 7 cents due to lower natural gas production and a decline in commodity price Other Energy Stocks With Favorable CombinationHere are some other companies from the space that you may want to consider on the basis of our model which shows that these too have the right combination of elements to deliver an earnings beat in the upcoming quarterly reports Marathon Oil Corporation NYSE MRO has an Earnings ESP of 4 17 and a Zacks Rank of 3 The company is slated to announce third quarter 2019 earnings on Nov 6 You can see Rattler Midstream LP NASDAQ RTLR has an Earnings ESP of 8 41 and a Zacks Rank of 3 The company is slated to announce third quarter 2019 earnings on Nov 5 Plains All American Pipeline L P NYSE PAA has an Earnings ESP of 0 43 and is a 3 Ranked player The company is scheduled to release third quarter 2019 earnings on Nov 5 7 Best Stocks for the Next 30 DaysJust released Experts distill 7 elite stocks from the current list of 220 Zacks Rank 1 Strong Buys They deem these tickers Most Likely for Early Price Pops Since 1988 the full list has beaten the market more than 2X over with an average gain of 24 5 per year So be sure to give these hand picked 7 your immediate attention |
CSCO | Information Technology The Best And Worst | The Information Technology sector ranks fourth out of the ten sectors as detailed in our 2Q16 Sector Ratings for ETFs and Mutual Funds report Last quarter the Information Technology sector ranked third It gets our Neutral rating which is based on aggregation of ratings of 29 ETFs and 122 mutual funds in the Information Technology sector as of April 18 2016 See a recap of our 1Q16 Sector Ratings here
Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the sector Not all Information Technology sector ETFs and mutual funds are created the same The number of holdings varies widely from 25 to 384 This variation creates drastically different investment implications and therefore ratings
Investors seeking exposure to the Information Technology sector should buy one of the Attractive or better rated ETFs or mutual funds from Figures 1 and 2
Figure 1 ETFs with the Best Worst Ratings Top 5
Best ETFs exclude ETFs with TNAs less than 100 million for inadequate liquidity
Sources New Constructs LLC and company filings
Figure 2 Mutual Funds with the Best Worst Ratings Top 5
Best mutual funds exclude funds with TNAs less than 100 million for inadequate liquidity
Sources New Constructs LLC and company filings
Five mutual funds are excluded from Figure 2 because their total net assets TNA are below 100 million and do not meet our liquidity minimums
Van Eck Market Vectors Semiconductor ETF NYSE SMH is the top rated Information Technology ETF and Fidelity Select Communications Equipment Portfolio FSDCX is the top rated Information Technology mutual fund Both earn a Very Attractive rating
First Trust Dow Jones Internet Index Fund NYSE FDN is the worst rated Information Technology ETF and Invesco Technology Sector Fund IFOAX is the worst rated Information Technology mutual fund FDN earns a Dangerous rating and IFOAX earns a Very Dangerous rating
506 stocks of the 3000 we cover are classified as Information Technology stocks
Cisco Systems NASDAQ CSCO 28 share is one of our favorite stocks held by FSDCX and earns a Very Attractive rating Cisco is on April s Most Attractive Stocks list Over the past decade Cisco has grown after tax profits NOPAT by 7 compounded annually Cisco has improved its return on invested capital ROIC from 14 in 2005 to a top quintile 17 in 2015 The company has generated a cumulative 32 billion in free cash flow FCF over the past five fiscal years However in spite of the operational strength exhibited by Cisco CSCO is undervalued and presents an excellent buying opportunity At its current price of 28 share Cisco has a price to economic book value PEBV ratio of 0 8 This ratio means that the market expects Cisco s NOPAT to permanently decline by 20 If Cisco can grow NOPAT by just 6 compounded annually for the next decade the stock is worth 43 share today a 54 upside
Servicenow NYSE NOW NOW 63 share remains one of our least favorite stocks held by IFOAX and earns a Dangerous rating ServiceNow was placed in the Danger Zone in November 2015 Since going public in 2012 ServiceNow s NOPAT has declined from 29 million to 154 million while its ROIC declined from 29 to 41 over the same time frame The drastic decline in profits and profitability is in stark contrast to ServiceNow s revenue growth as the company adopted a grow revenue at all costs strategy which clearly ignores profits Making matters worse when we placed NOW in the Danger Zone its valuation implied significant profit growth and despite NOW falling 21 since the publish date of our report those expectations remain unrealistically high To justify its current price of 63 share ServiceNow must grow immediately achieve 15 pre tax margins 15 in 2015 and grow revenue by 23 compounded annually for 13 years In this scenario 13 years from now ServiceNow would be generating over 14 billion in revenue slightly below Facebook s FB 2015 revenue It s clear how the expectations embedded in NOW remain overly optimistic
Figures 3 and 4 show the rating landscape of all Information Technology ETFs and mutual funds
Figure 3 Separating the Best ETFs From the Worst ETFs
Sources New Constructs LLC and company filings
Figure 4 Separating the Best Mutual Funds From the Worst Mutual Funds
Sources New Constructs LLC and company filings
Disclosure David Trainer and Kyle Guske II receive no compensation to write about any specific stock sector or theme |
CSCO | Cisco CSCO Stock Jumps 6 On Q3 Beats Positive Guidance | Cisco Systems Inc NASDAQ CSCO just released its third quarter fiscal 2016 earnings results posting earnings of 0 50 per share and revenue of 12 billion
Currently CSCO has a Zacks Rank 4 Sell but it is subject to change following the release of the company s latest earnings report Here are 5 key statistics from this just announced report below
Cisco
1 Matched earnings estimates The company posted earnings of 0 50 per share in line with the Zacks Consensus Estimate of 0 50 per share This number excludes 0 04 from non recurring items
2 Beat revenue estimates The company saw revenue figures of 12 billion topping our consensus estimate of 11 909 billion but falling 1 1 year over year
3 Reported sales in its largest unit switching slid 3 to 3 45 billion while Sales in its Asia Pacific China and Japan segment rose 10 to 1 94 billion
4 For Q4 expects earnings of 0 59 0 61 per share slightly better than the 0 58 Wall Street predicted The company sees revenue coming in a range of flat to up 3 from the prior year quarter compared with analysts expectations of a decrease
5 CSCO was up 1 58 or 5 91 to 28 30 as of 4 43 PM ET in after hours trading shortly after its earnings report was released
Here s a graph that looks at Cisco s reported EPS in the last five quarters Cisco Systems Inc is the worldwide leader in networking for the Internet Cisco s Internet Protocol based networking solutions are the foundation of the Internet and most corporate education and government networks around the world Cisco provides the broadest line of solutions for transporting data voice and video within buildings across campuses or around the world
Check back later for our full analysis onCisco s third quarter earnings report |
CSCO | Cisco Systems Inc Stock Shares Spike Up On Impressive Earnings Numbers | Cisco Systems NASDAQ CSCO
Cisco Systems Inc CSCO a global networking communications and information technology company yesterday reported their third quarter fiscal year 2016 financial results Cisco reported third quarter earnings of 0 57 per share which beat analyst expectations of 0 55 per share Cisco reported third quarter revenues fell 1 1 year over year to 12 billion which beat analyst expectations of 11 5 billion
Cisco Systems Inc CEO and CFO Comments
We delivered a strong Q3 executing well despite the challenging environment said Chuck Robbins Cisco chief executive officer I m pleased with our performance today as well as the progress we re making in transitioning our business to a more software and subscription focus which we ll continue to apply across our entire portfolio
Once again we delivered a solid quarter in Q3 with 3 top line growth and even faster non GAAP EPS growth and strong margins said Kelly Kramer Cisco executive vice president and chief financial officer We executed well on our financial strategy allowing us to invest in our business model transition to software and recurring revenues so that our customers are able to consume Cisco technology in the way that is best for their business
CSCO Technical Analysis
CSCO opened trading yesterday at 26 56 which was down from the previous days trading of 26 65 CSCO closed trading yesterday at 26 72 and spiked up after market to 28 21 equivalent to a 6 increase from the closing price Taking a look at the daily chart we can see the last time CSCO traded above this price level was on May 16th when it traded at 26 97 Taking a closer look at the daily chart we can see that CSCO has been on a recent downtrend dating back to April 27th when it traded at 28 64 CSCO has a float of 5 03 billion shares and traded almost 1 5 times the normal daily trading volume on Wednesday For trading purposes I would like to see CSCO open trading on Thursday above 27 75 and if it does I would be looking to take a long position at the bell My stop loss would be 0 25 from my entry position fearing anything more than that and the stock would start to fill in the gap up
Company Profile
Cisco Systems Inc designs manufactures and sells Internet Protocol IP based networking and other products related to the communications and information technology industry worldwide It provides switching products including fixed configuration and modular switches and storage products that provide connectivity to end users workstations IP phones wireless access points and servers and next generation network routing products that interconnect public and private wireline and mobile networks for mobile data voice and video applications The company also offers service provider video infrastructure including set top boxes cable telecommunications access products and cable modems and video software and solutions
In addition it provides collaboration products comprising unified communications products conferencing products telepresence systems and enterprise mobile messaging products data center products such as blade and rack servers modular servers fabric interconnects software and server access virtualization solutions security products including network and data center security advanced threat protection Web and email security access and policy unified threat management and advisory integration and managed services and other products such as emerging technologies and other networking products Further the company offers wireless products consisting of wireless access points network managed services and standalone switch converged and cloud managed solutions
Additionally it provides technical support services and advanced services The company serves businesses of various sizes public institutions governments and communications service providers Cisco Systems Inc sells its products directly as well as through channel partners such as systems integrators service providers other resellers and distributors The company was founded in 1984 and is headquartered in San Jose California |
XOM | Top Trade Ideas For The Week February 8 2016 Exxon | Here is your Bonus Idea with links to the full Top Ten
Exxon Mobil N XOM had a long run lower along with the price of oil from mid 2014 until making a bottom in August 2015 Since then the stock bounced retracing almost 60 of the drop in October It pulled back from there as well but made a higher low in January
The full price action is conforming to an Andrews Pitchfork showing the trend lower Within that pitchfork the price has been consolidating against resistance at 80 25 since mid December A move above that would be a first step in a reversal The next would be a break above the Andrews Pitchfork and then over the Hagopian Trigger Line would confirm a new trend higher
Momentum indicators support this thesis as the RSI is rising into the bullish zone and the MACD is crossed up and moving to positive The Bollinger Bands are also opening to allow a move There is resistance higher at 80 25 and 82 followed by 83 40 and 86 before 87 50 Over that would make for a higher high and another form of reversal confirmation Support lower comes at 78 and 76 50 followed by 74 Short interest is low at 1 3 and the company is expected to report earnings next on April 28th
The options chains are active and this week expiry sees the higher open interest below the current price at 77 with some size at 82 above The February monthly Expiry is similar with the biggest open interest at the 77 5 Strike but size at 82 5 as well The April Expiry sees large open interest at 70 and 60 on the put side and then building open interest on the call side from 77 50 to 90
Exxon Mobil Ticker XOM
Trade Idea 1 Buy the stock on a move over 80 25 with a stop at 78 A straight stock trade
Trade Idea 2 Buy the stock on a move over 80 25 with a March 80 72 5 Put Spread April 87 5 Covered Call 1 60 for the collar Adds a collar for protection
Trade Idea 3 Buy the April 80 February 82 5 Call Diagonal 3 00 Longer dated option selling shorter premium to lower the cost Look to repeat premium sale at expiry
Trade Idea 4 Buy the February 80 82 5 Call Spread 93 cents Low cost spread trade with a 2 69 1 reward to risk ratio
Trade Idea 5 Buy the February 80 82 5 Call Spread and sell the February 75 Puts 42 cents Adds a short put to increase leverage and reward to risk ratio to nearly 6 1 with risk of being put the stock at 75 in two weeks
After reviewing over 1 000 charts I have found some good setups for the week These were selected and should be viewed in the context of the broad picture reviewed Friday The groundhog did not see his shadow so an early Spring is on the way but it does not seem like winter is over for equity markets Heading into the second week of February equity markets are weak and looking to get worse
Elsewhere look for Gold to continue in its uptrend while Crude Oil consolidates broadly in the downtrend The US Dollar Index looks better to the downside in consolidation in the short run while US Treasuries are continue higher The Shanghai Composite and Emerging Markets look to continue their consolidation in their downtrends net week
Volatility looks to remain elevated keeping the bias lower for the equity index ETF s SPDR S P 500 N SPY iShares Russell 2000 N IWM and PowerShares QQQ Trust Series 1 O QQQ The indexes themselves all look weak and ready for more downside with the strongest the SPY trying to consolidate in its downtrend Use this information as you prepare for the coming week and trad em well
DISCLAIMER The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment I or my affiliates may hold positions or other interests in securities mentioned in the Blog please see my page for my full disclaimer |
MRO | Transocean upgraded Oasis Petroleum downgraded at Susquehanna | Transocean RIG 4 6 enjoys strong gains after Susquehanna upgrades shares to Positive from Neutral with a 16 price target while the firm downgrades Oasis Petroleum OAS 0 8 to Neutral from Positive with a 14 price target Offshore floater contracting activity has begun to rebound and we believe more positive commentary across several of the companies suggests the industry is beginning to heal and better utilization could be ahead in 2019 and 2020 Susquehanna says in raising its rating on RIG for more leverage to the sector The firm thinks OAS shares however are fully valued after rising 55 YTD while the SPDR S P Oil and Gas Exploration and Production ETF NYSEARCA XOP is just 18 higher Investors who want exposure to companies with substantial non Permian production should instead buy Marathon Oil MRO 3 3 which the firm rates Positive with a 26 price target improved from 24 Now read |
XOM | Exxon Mobil must allow climate change vote SEC | By Ernest Scheyder Reuters The U S Securities and Exchange Commission has ruled Exxon Mobil Corp N XOM must include a climate change resolution on its annual shareholder proxy a defeat for the world s largest publicly traded oil producer which had argued it already provides adequate carbon disclosures In a Tuesday letter to Exxon seen by Reuters the SEC said the oil producer cannot keep a proposal spearheaded by New York state s comptroller from a full shareholder vote at the company s annual meeting in May If approved the proposal would force Exxon to outline specific risks that climate change or legislation designed to curb it could pose to its ability to operate profitably Exxon had argued that the proposal was vague and that it already publishes carbon related information for shareholders including a 2014 report on its website entitled Energy and Carbon Managing the Risks The SEC found those reports do not go far enough It does not appear that Exxon Mobil s public disclosures compare favorably with the guidelines of the proposal Justin Kisner an attorney adviser with the SEC wrote to the oil producer Exxon Mobil declined to comment on the SEC s ruling We ll be communicating the board s recommendations on shareholder resolutions through the proxy document next month Exxon spokesman Alan Jeffers said It is not uncommon for companies to give shareholders their opinion on proxy votes It is unclear whether the proposal though has much chance of success Exxon shareholders have never approved a climate change related proposal and last year they rejected by 79 percent a request that a climate expert be appointed to the company s board Nevertheless New York state Comptroller Thomas DiNapoli who oversees the state s 178 3 billion pension fund called the SEC s decision a major victory for shareholders Investors need to know if Exxon Mobil is taking necessary steps to prepare for a lower carbon future particularly now in the wake of the Paris agreement DiNapoli said in a statement referring to an agreement last fall by 195 countries to rein in rising emissions that have been blamed for global warming Environmentalists cheered the SEC s decision The SEC has rejected Exxon s attempt to silence investors concerns about the very real financial risks associated with climate change said Shanna Cleveland of Ceres a nonprofit group that tracks environmental records of public companies DiNapoli was joined in the SEC filing by the Church of England the Vermont State Employees Retirement System the University of California Retirement Plan and the Brainerd Foundation OTHER BATTLES The ruling from the SEC comes as Exxon fights other carbon related battles including an inquiry by New York Attorney General Eric Schneiderman into whether the company misled the public and shareholders about the risks of climate change Exxon has hired a star attorney Theodore V Wells Jr as it fights the investigation from Schneiderman who subpoenaed the company for a trove of records emails and other documentation Schneiderman has aggressively fought companies on climate issues for years Last fall he settled an eight year investigation with coal producer Peabody Energy N BTU to amend its climate change disclosures so that they would be more robust Also on Wednesday the Rockefeller Family Fund said it will divest from fossil fuels as quickly as possible and eliminate holdings of Exxon
Shares of Exxon barely moved after the SEC s ruling falling 0 2 percent in after hours trading to 83 63 |
XOM | Rockefeller Family Fund hits Exxon divests from fossil fuels | By Terry Wade and Anna Driver HOUSTON NEW YORK Reuters The Rockefeller Family Fund said on Wednesday it would divest from fossil fuels as quickly as possible and eliminate holdings of Exxon Mobil Corp NYSE XOM saying the oil company associated with the family fortune has misled the public about climate change risks Though only a sliver of the endowment s modest 130 million in assets is invested in fossil fuels the move is notable because a century ago John D Rockefeller Sr made a fortune running Standard Oil a precursor to Exxon Mobil The charity said it would also divest from coal and Canadian oil sands Given the threat posed to the survival of human and natural ecosystems there is no sane rationale for companies to continue to explore for new sources of hydrocarbons the Rockefeller Family Fund said In a letter posted on its website the fund said Exxon s conduct on climate issues appears to be morally reprehensible Asked about the Rockefeller announcement Exxon spokesman Alan Jeffers said in a statement It s not surprising that they re divesting from the company The Rockefeller Family Fund provided financial support to InsideClimate News and Columbia University Journalism School which produced inaccurate and deliberately misleading stories about ExxonMobil s history of climate research Jeffers added Rockefeller Family Fund Director Lee Wasserman responded in an email that Exxon was not singled out We supported public interest journalism to better understand how the fossil fuel industry was dealing with the reality of climate science internally and publicly Wasserman said No specific company was targeted in our push to drive better public understanding and better climate policy Last year after publication of the stories that Exxon mentioned New York State Attorney General Eric Schneiderman launched an investigation into whether the company misled the public and shareholders about the risks of climate change On Wednesday Exxon said those stories wrongly suggested that we had reached definitive conclusions about the risks of climate change decades before the world s experts and while climate science was in an early stage of development The company said it believes the threat of climate change is clear and warrants action In response to the divestment movement many oil industry leaders have said millions of people in the developing world would be condemned to darkness and poverty if society were to halt the burning of fossil fuels before there is ample supply of cleaner energy sources As early as 2008 members of the Rockefeller family called on Exxon to increase spending on alternative fuels In late 2014 another fund associated with the family the Rockefeller Brothers Fund RBF said it would divest from fossil fuels
Shares of Exxon fell 0 4 percent to 83 75 on Wednesday as U S oil prices slipped 4 percent |
XOM | Probe of Exxon s climate change disclosures expands | By Valerie Volcovici and Sarah N Lynch WASHINGTON Reuters The top attorneys from Massachusetts and the U S Virgin Islands said on Tuesday they will investigate whether Exxon Mobil Corp N XOM misled investors and the public about the risks of climate change Massachusetts Attorney General Maura Healey and Virgin Islands Attorney General Claude Earl Walker announced their probes at a news conference in New York flanked by New York State Attorney General Eric Schneiderman former U S Vice President Al Gore and top attorneys from other states They said their probes into Exxon will be similar to ones launched by New York and California Healey said fossil fuel companies that have deceived investors about the risks climate change poses to the planet and to their bottom lines must be held accountable Walker said he wants to ensure there is transparency so consumers can make informed choices about what they purchase If Exxon Mobil has tried to cloud their judgment we are determined to hold the company accountable he said Exxon believes the probes by state attorneys general are politically motivated said Suzanne McCarron the company s vice president for public and government affairs We are actively assessing all legal options she said A total of 17 U S attorneys general are cooperating on probes into whether fossil fuel companies have misled investors on climate change risks The officials will also collaborate on other climate related initiatives In November Schneiderman subpoenaed Exxon to demand extensive financial records and emails in connection with its climate change disclosures California Attorney General Kamala Harris followed suit in January A coalition of more than 20 states has filed an amicus brief in support of the U S Environmental Protection Agency s Clean Power Plan a rule to crack down on carbon emissions that has been challenged by industry and 25 states in a federal appeals court The probes of Exxon were triggered by investigative reports last year by Inside Climate News and the Los Angeles Times that showed the company s in house scientists had flagged concerns about climate change decades ago which the company ignored or contradicted Investors also have started to target Exxon over the climate issue Last week the Securities and Exchange Commission ruled that Exxon must include a climate change resolution on its annual shareholder proxy The Rockefeller Family Fund said last week it will divest from fossil fuels as quickly as possible and eliminate holdings of Exxon Shares of Exxon closed up 31 cents or 0 37 percent at 84 53 on Tuesday Gore an active climate policy advocate joined the attorneys general at the announcement calling it a turning point in a broader effort to hold fossil fuel companies accountable He said efforts by fossil fuel companies to downplay climate change were akin to the way the tobacco industry promoted smoking for years in spite of health warnings The Massachusetts and Virgin Islands attorneys general did not elaborate on what legal tools will guide their investigations Legal experts have said options include consumer protection laws and blue sky securities laws The New York probe hinges on the state s Martin Act an anti fraud law as well as consumer protection statutes Some experts have said the issues involved could potentially trigger federal racketeering and organized crime RICO laws the Justice Department used in its landmark case against Big Tobacco Exxon s unusually long and pointed statement criticizing the probes said the company recognized the risks posed by climate change It said any assumption it withheld information on the topic is preposterous and based on a false premise that Exxon Mobil reached definitive conclusions about anthropogenic climate change before the world s experts and before the science itself had matured and then withheld it from the broader scientific community In her emailed statement to Reuters McCarron noted that Exxon scientists had participated with the United Nations Intergovernmental Panel on Climate Change
She also said the probes by the state attorneys general would have a chilling effect on private sector research |
XOM | Exxon Baytown laboratory workers accept contract extension | HOUSTON Reuters The last group of union workers at Exxon Mobil Corp s N XOM giant Baytown Texas refining and petrochemical complex voted on Thursday and Friday to accept a contract extension a union official said on Friday night Laboratory unit workers who make up about 10 percent of the 700 United Steelworkers union USW members working hourly jobs at Baytown joined with refinery and chemical plant workers who had accepted the four year extension in voting on March 24 and 25 Their resolve through the extension has made them the flagship of all three units USW Local 13 2001 President Ricky Brooks said of the laboratory workers after announcing the vote Laboratory workers rejected the extension in voting last week following the recommendation of USW leaders who had argued against accepting the company s first offer in talks to replace the current contract which expires on May 15 An Exxon spokesman hailed the extension s ratification by all three units at Baytown We agree with this successful outcome and early settlement of the contract said Exxon spokesman Todd Spitler The negotiation process was successful and has resulted in an agreement that is mutually beneficial for both the union and the company After last week s vote the USW had asked Exxon to renew the extension offer to give laboratory workers a second opportunity to vote on the proposal that provides a 3 percent increase in hourly wages in 2016 and again in 2017 and a 3 5 percent increase in 2018 The increases are equal to those agreed to by the USW and U S refinery owners following a national strike in 2015 The pay level in 2019 will be equal to what the USW and refinery owners agree to in talks expected to begin in January 2019 |
XOM | Exxon Mobil reaches agreement to restart crippled Torrance FCC | HOUSTON Reuters Exxon Mobil NYSE XOM has reached an agreement with California state regulators to restart a gasoline unit at its Torrance refinery in Los Angeles that went out of service in February 2015 following an explosion
The agreement with California s South Coast Air Quality Management Board will also require Exxon to pay 5 million in penalties for air pollution and violations that may occur during the unit startup |
MRO | Why Is Marathon Oil MRO Down 2 5 Since Last Earnings Report | It has been about a month since the last earnings report for Marathon Oil MRO Shares have lost about 2 5 in that time frame underperforming the S P 500
Will the recent negative trend continue leading up to its next earnings release or is Marathon Oil due for a breakout Before we dive into how investors and analysts have reacted as of late let s take a quick look at its most recent earnings report in order to get a better handle on the important drivers Marathon Oil Q2 Earnings Revenues BeatMarathon Oil reported stellar second quarter 2019 results wherein earnings and revenues surpassed the respective Zacks Consensus Estimate Higher than expected net sales volumes led to the outperformance Precisely the company s net sales volumes totaled 437 thousand barrels of oil equivalent per day MBOE d topping the Zacks Consensus Estimate of 414 MBOE d Its adjusted income from continuing operations came in at 23 cents per share outpacing the Zacks Consensus Estimate of 11 cents and increasing from the year ago earnings of 15 cents Notably increased year over year contribution from the U S E P segment and reduced expenses led to improved y y results Quarterly revenues of 1 433 million surpassed the Zacks Consensus Estimate of 1 359 million The top line was also marginally higher than the prior year figure of 1 417 million Segmental PerformanceU S E P Marathon Oil s U S upstream segment reported a profit of 215 million 75 higher than the year ago figure of 123 million The improvement was driven by higher output and lower production costs Production costs came in at 4 89 per BOE marking the lowest quarterly average unit cost since 2011 and representing a 14 y y decline Net production available for sale of 332 000 BOE d increased from 298 000 BOE d in second quarter 2018 The total U S output comprised 58 oil or 190 000 barrels per day bpd up 13 year over year This was also at the higher end of the company s guided range of 180 000 190 000 bpd The improved year over year production especially from the Bakken Northern Delaware and Eagle Ford aided the company s quarterly performance Notably Bakken output came in at 104 000 BOE d mirroring a 26 8 rise from the year ago level The Northern Delaware region recorded production of 28 000 BOE d surging 64 7 from second quarter 2018 Output from Eagle Ford and Oklahoma came in at 109 000 BOE d and 82 000 BOE d compared with 106 000 BOE d and 80 000 BOE d respectively in the year ago quarter Marathon Oil realized liquids crude oil and condensate price of 59 18 per barrel lower than the year earlier level of 66 03 Natural gas liquids price realizations also declined 34 to 14 60 a barrel Natural gas realizations also decreased 13 3 year over year to 1 89 per thousand cubic feet International E P The segment s income decreased from 142 million in the prior year period to 96 million in the second quarter due to lower production and weak commodity price realizations Marathon Oil reported production available for sale of 103 000 BOE d down from 121 000 Boe d in second quarter 2018 The decrease in output from Equatorial Guinea and the United Kingdom along with the company s exit from Libyan operations resulted in the weaker output Subsequent to the end of second quarter 2019 Marathon Oil closed the divestment of U K assets marking a complete exit from the country In an effort to deepen focus on prolific U S shale plays the company bided goodbye to 10 countries since 2013 Currently the firm s international operations are limited to the integrated business in Equatorial Guinea Marathon Oil realized liquids crude oil and condensate price of 58 21 per barrel reflecting a12 decline from the year earlier quarter Natural gas and natural gas liquids price realizations came in at 0 35 per thousand cubic feet and 1 67 a barrel reflecting y y decline of 33 and 42 6 respectively Costs Capex Balance SheetTotal costs in the quarter totaled 1 178 million lower than 1 212 million in the prior year period During the quarter Marathon Oil s capital expenditure totaled 636 million Additionally the company generated organic free cash flow FCF of 137 million with the year to date FCF amounting to 217 million As a show of confidence in its cash generating ability the Houston producer boosted the share buyback program from 950 million to 1 5 billion As of Jun 30 it had cash and cash equivalents of 961 million and a long term debt of 4 902 million Debt to capitalization ratio of the company was 28 8 GuidanceMarathon Oil s 2019 capital expenditure remains intact at 2 6 billion For 2019 the company expects total output to increase 10 from the year ago level targeting 12 growth in the United States Total U S oil output in third quarter 2019 is anticipated in the band of 190 000 200 000 bpd suggesting a 2 6 sequential increase from the midpoint of the guided range International oil production is likely to be within 12 000 16 000 bpd amid divestment of U K and Kurdistan assets
How Have Estimates Been Moving Since Then
It turns out estimates review have trended upward during the past month The consensus estimate has shifted 26 67 due to these changes
VGM Scores
At this time Marathon Oil has a great Growth Score of A though it is lagging a bit on the Momentum Score front with a B Charting a somewhat similar path the stock was allocated a grade of A on the value side putting it in the top quintile for this investment strategy
Overall the stock has an aggregate VGM Score of A If you aren t focused on one strategy this score is the one you should be interested in
Outlook
Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising Notably Marathon Oil has a Zacks Rank 3 Hold We expect an in line return from the stock in the next few months |
CSCO | CSCO The Answer To Those Saying Chart Analysis Is Useless | Cisco Systems Inc NASDAQ CSCO
The answer to those saying that chart analysis is useless |
CSCO | Retired Investors Give This Blue Chip Technology Stalwart A Close Look | Introduction
I believe that building and managing a successful stock portfolio is simple and straightforward but not necessarily easy Building and successfully managing a portfolio of individual stocks requires work a disciplined philosophy and a reasonable commitment of time But perhaps most importantly it s critical to start out with a precise understanding and acceptance of how you approach the investing process
You can either behave as a prudent long term investor or as an active trader The differences between these two approaches are not subtle they are vast Unfortunately at least in my personal experience there are many well intentioned people that feel they would be most comfortable with the prudent long term investor approach but cannot resist the seduction of stock price volatility No matter how hard these investors try they cannot ignore the daily ups and downs of stock price movements
As one Morningstar writer I once read so aptly put it Given the proclivity of Mr Market to plead temporary insanity at the drop of a hat we strongly believe that it s not worth devoting any time to predicting its actions Stated more directly in the short run stock price movements are often irrational and consequently unpredictable Later I will provide a clear example supporting the veracity of that statement Nevertheless there are many active traders that believe they have an edge however I ve yet to have anyone convince me that they in truth and fact do
This brings me to the primary difference between the mindsets and perspectives of active traders versus long term investors Active traders tend to primarily be stock price focused In their world everything is about whether the price of the stock is rising or falling A stock with a falling stock price is a bad stock where a stock with a rising stock price is a good stock Active traders possess more of a casino like mentality and as such have little or no regard or concern about fundamentals or business values
Ironically the active trading approach requires more time energy and effort than does a more prudent long term approach In other words active trading essentially turns investing into a full time job Consequently I contend that this approach is not appropriate for most people Most of us have more important things to do with our lives and time than sitting in front of a computer screen obsessively tracking stock prices
In contrast long term investing implies focusing more on the business you are invested in with little or even no concern about short term price volatility Instead of focusing on price movements the focus is on the company s financial performance and fundamental strengths Prudent long term investors understand that in the long run it s the success of the business that truly matters most These investors recognize and understand that buying a stock represents becoming a part owner in a business
Personally when I invest in a stock as a passive shareholder owner I am not interested in running the business I leave that work to the management team The only work I m interested in is having my money working for me As a minority shareholder I am keenly interested in how the company is doing and only mildly interested in its short term stock price movements This is especially relevant when I have a clear understanding of what the business is worth Therefore if or when short term market price drops below that level I never assume I m losing money Especially if the business I own is continuing to perform as expected Instead I simply consider the business temporarily illiquid
Therefore if I did need to raise money for example in an emergency I would look to other stocks I might own that the market was either valuing correctly or overvaluing My point is that I don t consider it intelligent to sell an asset for less than I believe it is worth This type of business owner s mindset goes a long way towards keeping emotion out of the investing equation I draw my confidence from the strength and health of the business I own which keeps me from panicking during periods of high market volatility
I have chosen the business below because I believe it is attractively valued and because it offers a high yield in today s low interest rate environment However this particular business also offers important insights and represents a quintessential example of the principles I have been discussing in this introduction In other words not only do I consider it an excellent investment at this time I also feel it offers vitally important investing lessons I intend to elaborate on both as I review Cisco Systems Inc NASDAQ CSCO below
Quintessential Lessons in Long Term Investing
It is a commonly held view that technology companies are cyclical stocks To a great extent this is true However just because a business operates in the Technology Sector does not simultaneously suggest that it is a highly cyclical business Cisco is a case in point A quick review of the following earnings and dividends only on Cisco suggests that this technology bellwether looks more like a growth stock than a cyclical stock Business did falter a little bit during our last two recessions but neither case suggests deep cyclicality
On the other hand since fiscal 1997 earnings growth has averaged over 13 per annum and the company initiated a dividend at the beginning of fiscal year 2011 The honeydew green line white plots the company s dividends per share and the area below the line represents the portion of earnings they paid out commonly known as the dividend payout ratio The light green shaded area shows the same dividends after they have been paid out This graph illustrates our first look at Cisco the business
When looked at from this business perspective I see very consistent and strong long term business performance Additionally a review of the FAST FACTS boxes to the right provides additional initial insights into the quality of this business I like the low debt to capital ratio of 25 I like the AA S P credit rating and I like the dividend yield of 3 9 I also like the growth of the company s dividend since they started paying one in 2011 From what I see here Cisco represents exactly the kind of business that I would like to be the owner of Importantly there are no stock prices to contaminate my thinking or engender emotional responses
When I am initially examining a business for prospective investment I start out by reviewing its long term earnings performance as I did with Cisco above Next I like to also look at its historical cash flow generating performance Examining cash flows is even more relevant when I am evaluating a dividend paying stock Clearly Cisco is more than adequately covering its current dividends with strong cash flows
Investing in the Business
At this point I consider Cisco a further research worthy candidate because I like what I see regarding my first look at the business behind Cisco s stock
Note before I would actually consider a stock research worthy it would also have to be available to me at an attractive valuation Cisco currently meets my valuation criteria However this can only be determined by including stock price into the equation In the context of this article s secondary objective of presenting time tested lessons in investing I have chosen to save stock price inclusion for later when I delve deeper into valuation principles
Nevertheless Cisco s consistent and impressive long term operating record motivates me to want to look deeper under the hood Of course this implies diving into the company s financial statements
The first metric I like to examine in the financial statements are revenues Bottom line results like earnings must start and come from the top line Additionally accounting conventions coupled with financial engineering could possibly paint a rosier earnings picture than is deserved whereas top line results clearly illustrate whether a business is truly growing or not I like to look at revenues from two perspectives First I examine gross revenues in dollars Cisco s long term revenue growth has been impressive as depicted below
However since I am also a passive shareholder I also like to look at revenues per share Revenues per share can be impacted by what some call financial engineering in the form of share buybacks On the other hand as I will later illustrate share buybacks can be a positive or a negative depending on the company s stock valuation at the time and or whether or not the company has a good use or need of its cash to fund future growth Cisco s revenue per share record is just as impressive as its gross revenues
After reviewing a company s top line I like to turn my attention to profitability At this point I am interested in determining how much profitability the company generates per dollar of sales To evaluate this I look at gross profit margins compared to net profit margins Cisco generates very high gross profit margins which I consider a plus My personal benchmark for net profit margin is 15 or better Cisco has consistently produced net profit margins exceeding that benchmark I like businesses with high net profit margins
After I have reviewed profit margins I typically turn to analyzing return on equity As a shareholder I consider this metric important because it essentially measures the return the company is earning on shareholder money I am quite comfortable when I see a return on equity of 10 or better Cisco earns returns on equity above this threshold One caveat regarding return on equity is that companies can boost it by taking on more debt Consequently I put more weight on this metric when debt levels are reasonable as is the case with Cisco
Thus far I ve illustrated some of the go to metrics that I like to look at when evaluating the strength and health of a business I might be interested in investing in However I don t stop here Additionally I thoroughly examine the company s balance sheet cash flow statement and income statement These financial items are available from numerous sources Personally I utilize F A S T Graphs and FUN Graphs fundamental underlying numbers to facilitate a deeper look into the company s financials
Bonus for readers that are interested I offer the and set of FUN Graphs on Cisco Systems Inc NASDAQ CSCO
I typically start out by examining all of the metrics together on the company s balance sheet cash flow statement and income statement Here is a sample of Cisco Systems balance sheet which includes assets per share atps cash per share cashps common equity per share ceps also known as book value debt long term per share dltps debt to total per share dtps and invested capital per share icaptps
Additionally I will look at each metric on the balance sheet one at a time in order to focus more clearly on each metric Here s an example of Cisco s cash Clearly Cisco possesses significant financial resources and flexibility
Learning About The Business
Once I have thoroughly examined a company s financial results health and strength I typically turn my attention to learning as much as I can about what the company does and how they make their money The easiest way to do that is to simply follow the link on my F A S T Graphs to the company s website Although I recognize that much of what I will find will be company propaganda spun as positively as they can I can also learn a lot about the company s products and various business enterprises Here is a snapshot from Cisco s website illustrating key product areas with specific links to each If I m seriously interested in investing in the company I will peruse each of those links
I will usually then go to the company s investor services sections and look for presentations that the company has recently presented Here is an example of an informative slide from Cisco s Q2 Fiscal Year 2016 Conference Call
But my favorite places to learn about the company s businesses are by reading the compay s 10 Ks and 10 Qs As I previously stated researching a stock is simple and straightforward However I also stated that it requires time and effort Consequently I will usually not go to this extent with my research process unless I am very confident that I am examining an attractive potential investment
Cisco Systems Inc Quintessential Lessons on Valuation
In the introduction to this article I suggested that stock price movements are often irrational and consequently unpredictable Furthermore I promised that I would present a clear example supporting the veracity of that statement The stock market s long term valuation history on Cisco Systems provides compelling evidence supporting just how irrational the stock market can be at times
In the late 1990s Cisco Systems along with several other bellwether technology stocks were being valued at ridiculous valuations see the red circle on the graph At its peak Cisco was being valued at over 160 times earnings and for a time had one of the largest market caps of any company on the earth However this was an irrational valuation because Cisco s fundamentals clearly did not support such a ridiculously high level In other words Cisco s business was worth nowhere near what the market was valuing it at
Remember I also earlier stated that it s the value of the business that truly matters in the long run Therefore the subsequent fall from grace of Cisco s stock price in calendar years 2000 and 2001 presents striking evidence of that reality But we must also recognize that just as the market can irrationally overvalue a business it can also be just as irrational with undervaluing a business
It is my contention that this is precisely what has been happening with Cisco s stock price since the beginning of 2010 see the green circle on the graph Consequently my primary investment thesis for suggesting Cisco is based on what I consider to be significant current undervaluation by the market A blended P E ratio below 12 and a dividend yield of approximately 3 9 with the opportunity to grow seems compelling to me considering Cisco s quality and financial health as described above However prudence might dictate waiting until the company reports 3rd quarter results on May 18
One additional comment regarding Cisco its recent performance and valuation is to point out that in spite of this the company has outperformed the S P 500 since it initiated its first dividend in fiscal 2011 The following earnings and price correlated graph with performance calculations illustrates how attractive Cisco has been over this timeframe
Earnings and price are not the only valuation metrics I like to examine Cisco also looks very attractively valued based on its current price to book pb and price to sales ps
Management
One final but extremely important element involved in thoroughly researching a company is analyzing the company s management team In my personal opinion the capability of Cisco s management team has been historically much maligned providing further evidence of irrational investor behavior This especially relates to former CEO John Chambers Over the years I have read many scathing criticisms of his lack of skills of running Cisco Yet the very first graph I presented in this article clearly supports the undeniable fact that John Chambers did a great job running the business
The company s earnings growth under his reign has been nothing short of spectacular On the other hand the irrational way that the market has been pricing the stock was simply beyond management s control Management can grow the business but they have no control over how the market will price the stock John Chambers has recently stepped down as CEO but remains executive chairman
I offer the following graphical comparison to illustrate the competency of Cisco s management team and their stewardship since fiscal year 1997 Earlier I discussed the potential impact of financial engineering on earnings relating to share buybacks The comparison of the following two graphs illustrate that Cisco s management was prudently issuing shares when valuations were high above the orange line and excessive In contrast this also illustrates how management has been prudently buying back shares recently when valuation of the stock was low on or below the orange line
Summary and Conclusions
I am a firm believer and aligned with legendary investor Warren Buffett who said investing is most intelligent when it is most businesslike Prudent long term investors are most interested in positioning themselves as long term shareholder owners or partners in excellent businesses At the same time they recognize that in the long run business results matter most When you are investing as an owner you go in with the intention of owning the investment for a long period of time Consequently you spend most of your effort and energy focusing on business results and very little worrying about day to day price volatility
I believe that most people intuitively understand and even embrace the time tested principles of investing as business owners However I also recognize that the relentless siren song of stock price volatility in the short run can be very unnerving Nevertheless if long term investing success is truly your goal then I believe it s imperative that you learn to trust business results more than short run price action
Disclosure Long CSCO
Disclaimer The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted The information in this document is believed to be accurate but under no circumstances should a person act upon the information contained within We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation |
CSCO | The Week Ahead Springtime For Housing | This week s economic calendar includes some key data on the housing market and few other major reports The debate about the strength of the U S economy continues The housing market is an important contributor to the economy As we enter the key season for real estate many will be asking
Is it Springtime for housing
Prior Theme Recap
In my last WTWA I predicted that there would be special attention to the mixed message of economic reports contrasting the relative strength of employment with other data That was a major theme Some insisted that the employment was overstated Others said it was a lagging indicator A few mentioned that GDP was probably understated Friday s relatively strong data continued the mixed message I also suggested that the political sideshow would grab attention but that was obvious
Once again the early strength faded at the end of the week Doug Short captures the story of the decline the third straight with his excellent weekly chart With the ever increasing effects from foreign markets you should also add Doug s World Markets Weekend Update to your reading list
The adds more analysis on the major themes as well as a multi year context
We would all like to know the direction of the market in advance Good luck with that Second best is planning what to look for and how to react That is the purpose of considering possible themes for the week ahead You can make your own predictions in the comments
This Week s Theme
The economic calendar has mostly secondary reports again this week Friday s stronger economic data only intensified the debate as the market reacted negatively This week features three important housing reports and two of lesser significance Since springtime brings higher expectations for this sector I expect more attention than usual The punditry will be asking
Is it Springtime for Housing
Background
Attention focuses on housing with some frequency since it is important to the economy Wells Fargo that residential investment rose 14 8 in the past year contributing 0 5 to the Q1 GDP growth which coincidentally was 0 5 Last year the National Association of Homebuilders that housing was over 15 of GDP The impact is not just home sales but also remodeling
Viewpoints
The basic themes moving from bearish to bullish on stocks are as follows
The real estate market is about to crash
Didn t we learn anything
Increasing housing prices strain the affordability for new buyers prices are too high
do not have
Homes held in foreclosure proceedings or by speculators provide low priced competition Whoops That one changed
Home sales are low because there is insufficient supply the new version
Interest rates remain at historically low levels helping affordability
We can expect increasing purchases from young people
Increased home prices enable more people to sell trading up or even sideways to take new jobs
It is easy to find disciples for each viewpoint
As always I have my own opinion in the conclusion Make your own choice and feel free to make your case in the comments
But first let us do our regular update of the last week s news and data Readers especially those new to this series will benefit from reading the
Last Week s Data
Each week I break down events into good and bad Often there is an ugly and on rare occasion something really good My working definition of good has two components
The news is market friendly Our personal policy preferences are not relevant for this test And especially no politics
It is better than expectations
The Good
There was some good news
Framing lumber prices are higher One of the many reasons to follow is finding data no one else mentions
The shallow industrial recession seems to be over provides both data and analysis
Retail sales were much stronger than expected up 1 3 versus expectations of 0 9 The retail earnings reports varied widely with high end names doing poorly Online sales were excellent and gas station sales moved higher Remember that gas prices have been part of the recent retail weakness Auto sales remain strong
Life expectancy is higher and health inequality is lower of the presents the data including the chart below There is still a downward slope in the data but the entire line has shifted
The Michigan sentiment index beat both last month and also expectations by a wide margin 95 8 versus about 90 This survey gets timely information about job creation and spending that we do not see elsewhere As always I recommend looking at the and also great discussion from Doug Short This month I also recommend checking out the You can find long term charts and a great explanation of the method Here is the summary of the key forward looking data
The job market improved as indicated by the JOLTs report I often describe this as the most misunderstood data release Too many people try to use it to analyze net job growth something better done with various other sources The ECRI has a new indicator something about purple animals subtracting actual hires from job openings and if this difference increases They seem to be on a mission to find something negative in the data Here is their key chart
Let s keep this simple
Job openings are good the more the better
The quit rate shows voluntary departures from jobs a strong signal of confidence about finding an alternative
has an article that is geared toward non economists but explains the key points The article notes that quits are highest in low paying jobs and lowest among financial services workers and government employees
the strength of the voluntary quit rate versus layoffs
The Bad
Some of the news was negative
Energy bankruptcies increased despite rising oil prices suggests that recent oil price increase might be too little too late for many companies
Rail traffic continues to worsen the 10 6 y o y decline adding a variety of interesting comparisons
Earnings season continued with mixed data has a nice weekly analysis with interesting charts and also a focused discussion on key sectors Here are some of the main themes
The 71 earnings beat rate is higher than usual but everyone knows the expectations have been lowered
Earnings declined for the fourth consecutive quarter
The sales beat rate was below normal
Many companies cited the strong dollar as a source of weakness so they expect better future results
Autos and internet sales showed the most strength
A forgiving market did not punish misses as much as usual at least on average
Jobless claims edged higher 294 000 was the highest reading in more than a year Employment is important and we should watch in closely both job creation which this does not measure and job loss which it does
Business inventories rose more than expected The inventory data is easy to spin and difficult to interpret accurately Does it reflect unsold goods or business confidence in future sales GEI sees the bullish side
Puerto Rico defaulted on a 400 billion debt payment The Council on Foreign Relations
The Ugly
The TSA Airport security lines have grown much longer People are missing planes and some airlines are even delaying flights Baggage is sitting outside because of inspection delays There are no immediate plans for more TSA resources so it is a matter allocating what is available Here is a good story in via a tweet from Real Clear Markets of the lines at Chicago s Midway airport now has over two million views
The comments from Guardian readers suggest that the situation is having an impact on potential international travelers
The Silver Bullet
I occasionally give the Silver Bullet award to someone who takes up an unpopular or thankless cause doing the real work to demonstrate the facts Think of The Lone Ranger No award this week Nominations are welcome I see plenty of opportunities
Quant Corner
Whether a trader or an investor you need to understand risk I monitor many quantitative reports and highlight the best methods in this weekly update I recently made some changes in our regular table separating three different ways of considering risk For valuation I report the equity risk premium This is the difference between what we expect stocks to earn in the next twelve months and the return from the ten year Treasury note I have found this approach to be an effective method for measuring market perception of stock risk This is now easier to monitor because of the excellent work of whose analysis of the Thomson Reuters data is our principal source for forward earnings
Our economic risk indicators have not changed
In our monitoring of market technical risk I am now using our new model Holmes Holmes is a friendly watchdog in the same tradition as Oscar and Felix but with a stronger emphasis on asset protection We have found that the overall market indication is very helpful for those investing or trading individual stocks The score ranges from 1 to 5 with 5 representing a high warning level The 2 4 range is acceptable for stock trading with various levels of caution
The new approach improves trading results by taking some profits during good times and getting out of the market when technical risk is high This is not market timing as we normally think of it It is not an effort to pick tops and bottoms and it does not go short
Interested readers can get the program description as part of our new package of free reports including information on risk control and value investing Send requests to info at newarc dot com
In my continuing effort to provide an effective investor summary of the most important economic data I have added Georg Vrba s Business Cycle Index which we have frequently cited in this space In contrast to the ECRI black box approach Georg provides a and the components
For more information on each source
Recent Expert Commentary on Recession Odds and Market Trends
Provides an array of important economic updates including the best charts around One of these is monitoring the ECRI s business cycle analysis as his associate Jill Mislinski does in She respectfully cites their In my view it uses tortured logic to reach a negative conclusion of the JOLTs report discussed further above The of this report is much much stronger The ongoing review of the ECRI is comprehensive and provides an interesting comparison with Recession Alert one of our featured sources Chart lovers will love this regularly updated article
Doug s is the single best visual review of the indicators used in official recession dating You can see each element and the aggregate along with a table of the data Doug s updates cover both the individual elements and a chart packed summary helping to see what it all means
Bob Dieli does a subscription required after the employment report and also a monthly overview analysis He follows many concurrent indicators to supplement our featured C Score His view of where we are in the business cycle differs sharply from that of the ECRI His approach has been more accurate over a long period and especially in the last decade I am overdue for an update comparing the recession methods So many great topics to consider so little time
A variety of strong quantitative indicators for both economic and market analysis While we feature the recession analysis Dwaine also has a number of interesting systems These include approaches helpful in both economic and market timing He has been very accurate in helping people to stay on the right side of the market
provides an array of interesting systems Check out his site for the full story We especially like his updated weekly and now featured in our table Georg also has an This has long confirmed that there is no recession signal What would it take to change the prognosis In this he suggests that an increase of 0 3 in unemployment would warn of a recession
The Week Ahead
We have a modest week for economic data While I highlight the most important items you can get an excellent comprehensive listing at Investing com You can filter for country type of report and other factors
The A List includes the following
Housing starts and building permits T Most are looking for a rebound
Existing home sales F Less GDP impact than new construction but a good read on the market
FOMC minutes W Expect pundit efforts to make something out of nothing
Leading indicators Th A controversial but popular measure of economic trends
Industrial production T An important but volatile series Signs of improvement in a lagging sector
Initial claims Th The best concurrent indicator for employment trends
The B List includes the following
Philly Fed index Th I have promoted this indicator in importance after an academic study of it First May data
Business inventories F March data but relevant for Q1 GDP
CPI T Inflation by any measure remains of secondary importance until we get a few hot months Then the story will change significantly
Crude inventories W Often has a significant impact on oil markets a focal point for traders of everything
There is a little FedSpeak The Supreme Court will announce some decisions perhaps including Obama actions on immigration and Puerto Rico Political news will continue and some are indeed attributing market weakness to the probable candidates There are still a few important earnings reports
How to Use the Weekly Data Updates
In the WTWA series I try to share what I am thinking as I prepare for the coming week I write each post as if I were speaking directly to one of my clients Each client is different so I have six different programs ranging from very conservative bond ladders to very aggressive trading programs It is not a one size fits all approach
To get the maximum benefit from my updates you need to have a self assessment of your objectives Are you most interested in preserving wealth Or like most of us do you still need to create wealth How much risk is right for your temperament and circumstances
WTWA often suggests a different course of action depending upon your objectives and time frames
Insight for Traders
We continue our neutral market forecast Felix is still 100 invested but with less aggressive sectors REITs and utilities have moved near the top of the list The more cautious Holmes is also fully invested Holmes uses a universe of nearly 1000 stocks selected mostly by liquidity Even when the overall market is neutral there will often be some strong candidates Holmes holds a maximum of 16 positions at one time For more information about Felix I have posted a further description You can sign up for Felix and Oscar s weekly ratings updates via email to etf at newarc dot com They appear almost every day at Scutify follow I am trying to figure out a method to share some additional updates from Holmes our new portfolio watchdog You learn more about Holmes by writing to info at newarc dot com
Dr Brett offers innovative ideas for traders and he does it week after week Then prepare to be frustrated in your trading
So what is our trader s need It s the need to trade the need to make money If the market isn t making sense there s no trade to put on and no money to be made If the setup isn t there the trade isn t there and neither are the profits If a bad trade is placed the fruits of a good trade are erased and there go profits That same dynamic can also make it difficult to step away from screens even though the trader recognizes in real time the signs of frustration It s not OK to miss opportunity
Holmes is barking agreement Felix would also agree if he were here instead of at a blackjack table in Vegas emailing daily results I hope Felix doesn t get caught count counting cards like some of those other models
provides us with another valuable insight from Davidson This quotation shows what traders should really be watching if they want to catch short term moves
Today s pools of capital are seeking gains within the day by day trading frenzy The least little shift is taken as the possibility of a new trend and capital shifts in anticipation
And later
Most of the discussion today centers on whether it is oil or the USD which is driving the correlation This is like a discussion of which comes first the Chicken or the Egg My perception is that the main driver in changing global trade balances Even if one could unravel all the inputs we have on global trade the data itself is incomplete with a number of nations treating global trade figures as state secrets Global trade balances impact prices and currencies long term to produce the correlations seen in the chart from Jan 1973
Insight for Investors
I review the themes here each week and refresh when needed For investors as we would expect the key ideas may stay on the list longer than the updates for traders Major market declines occur after business cycle peaks sparked by severely declining earnings Our methods are focused on limiting this risk Start with our and follow the links
We also have a page summarizing many of the If you read something scary this is a good place to do some fact checking Pick a topic and give it a try Feel free to suggest new topics if your own fear is not on the list
Some readers expressed concern about the overall market valuation I discussed this last week If you are worried about all of those valuation indicators which supposed worked for centuries but not in the last couple of decades I urge you to read Is the Market Cheap Three things you need to know about valuation but don t
Many individual investors will also appreciate our two new free reports on Managing Risk and Value Investing Write to info at newarc dot com
Other Advice
Here is our collection of great investor advice for this week If I had to pick a single most important source for investors to read it would be David Merkel s post He notes the low probability of real disaster scenarios In the context of a thoughtful analysis he provides the following advice
If you give into fears like these you can become prey to a variety of investment experts who counsel radical strategies that will only succeed with very low probability Examples
Strategies that neglect investing in risk assets at all or pursue shorting them Even with hedge funds you have to be careful we passed the limits to arbitrage back in the late 90s and since then aggregate returns have been poor A few niche hedge funds make sense but they limit their size
Gold odd commodities trend following CTAs can sometimes make sense as a diversifier but finding one with skill is tough
Anything that smacks of being part of a secret club There are no secrets in investing THERE ARE NO SECRETS IN INVESTING If you think that con men in investing is not a problem read I spend lots of time trying to take apart investment pitches that are bogus and yet I feel that I am barely scraping the surface
Stock Ideas
has an interesting recommendation for retired investors Cisco Systems NASDAQ CSCO As usual he does a thorough analysis using his first rate methods See the whole story for illustrative charts and the key points
Barron s has a NASDAQ REGN which it calls the best of the biotechs I see many attractive names in this beaten down sector The article does a good job of explaining why Regeneron is special
Personal Finance
Professional investors and traders have been making Abnormal Returns a daily stop for over ten years The average investor should make time even if not able to read AR every day as I do for a weekly trip on Wednesday Tadas always has first rate links for investors in this There are several great choices worth reading but my favorite is from Josh Brown that many investors have a toxic combination of reducing financial literacy and increasing confidence It is nothing personal but a general consequence of aging
Outlook on China
There has been a lot of very negative commentary about China in recent weeks Some of this comes from outspoken hedge fund managers who have significant short positions To balance this investors need information from those who study and invest in China One such source is which provided an excellent briefing for financial advisors last week While there were many key points her are two worth extra emphasis
And also most observers focus on manufacturing ignoring the planned shift to a service driven consumer economy
My conclusion is that investing in China is not a matter of if but when and how The financial press emphasizes data points like the flash PMI which have little relevance to the key issues Full disclosure KraneShares offers KWEB We own it in our aggressive program and I am considering expanding it to more investors who need more international exposure
Market Fairness
Some individual investors are missing opportunities because of the perceived unfairness of the system If you are trading in modest size high frequency trading and increased your potential gains
Watch out for
This cryptocurrency seems to include elements of multi level marketing Ponzi schemes and a lack of liquidity There is always a great temptation to make money fast but recent economic conditions may have increased the appetite Before investing I urge you to do some careful research Here is an opinion from a and also one from who has a great quotation from the
The investment opportunity promises guaranteed returns
The opportunity is described as once in a lifetime or pressures you to buy immediately before it is too late
The deal sounds too good to be true Compare any promised return with the returns on well known stock indexes
The investment offer was unsolicited
You are unable to find any public information about the investment opportunity Often this is explained away as the investment being by invitation only and a secret that is best kept lest too many people get involved
The opportunities or people touting them are located outside of the United States This particular point gives the scam an exotic feel and includes the idea real or implied that profits can be squirreled away offshore and away from the taxing authorities
You do not know the person who is contacting you or they are just an acquaintance
Check out the full post to see the comparison to the Onecoin marketing materials
Final Thoughts
Last week I offered a strong opinion about resolving the tension between various economic data sources I make most of WTWA a balanced summary of what is happening with an emphasis on a current theme It is in the conclusion where I do my editorializing As I noted last week when I do not have a solid answer to the weekly theme question I am not afraid to say so If only more observers would do the same Readers sometimes complain that I do not give a specific answer to my own question That misses the point The weekly question is my prediction for the market theme what you will see in the media I cannot control that and it would be dishonest to claim an answer that I do not really have
With respect to housing I expect growing strength It might not show up this month since we are still following Bill McBride s I plan to watch Calculated Risk stories this week for the best interpretation of the data He
Housing starts are up 13 from March 2014 to March 2016
New home sales are up 25 over the two years
Existing home sales are up 13
House prices are up 9 7 Case Shiller National Index February 2014 to February 2016
Some day I ll be bearish again on housing But not in 2014 and not now
My own reasons for longer term optimism include the following
Supply Not that long ago many were predicting a shadow supply of foreclosed homes That was gradually absorbed Now the same sources are discussing a lack of inventory
Demand When I first wrote about shadow demand it generated a lot of skepticism from readers something that I embrace We still have plenty of people living with parents when they would prefer their own home Many magazine feature writers try to make this into a new preference of Millennials I doubt it Mostly this is the result of the lag in employment growth
Demographic and social trends These are also demand factors of course but as people enter the labor force we get more household formation Immigration policy has been a negative in recent years and it remains a wild card
Improving home prices Many homeowners were making their payments but were underwater on their mortgages Higher prices have resolved some of that They are now abler to move more readily either to follow the jobs or to upgrade
Trading and Investment Implications
Traders must continue to work the trading range guessing daily reaction to Fed speculation the moves in the dollar and the shifts in oil prices On Friday stronger economic data sent the market lower For the short term the message is that good news is bad news
Investors should take the opposite perspective The worry about the economic message from oil prices and interest rates is overdone A good investor looks for good value There is a method for this
Find sectors and stocks that are currently unloved
While I have been cautious about adding to our underweight energy positions not just unloved but hated I do like and own homebuilders and regional banks |
XOM | Recession On The Horizon Look At The Bigger Picture | The Bank of Japan BoJ rattled global markets last Friday by announcing its adoption of a negative interest rate policy intended to spur banks to lend and consumers to spend The world s third largest economy then joins a handful of European countries who are experimenting with less than zero rates among them Denmark Austria Switzerland and which I ve written about previously
The BoJ s move is just the latest to suggest that global central banks bag of tricks to stimulate growth is quickly running empty and that the imbalance between monetary and fiscal policies continues to accelerate Negative rates charge banks for parking excess cash and ultimately punish savers yet make gold more attractive
Already companies and individuals are more indebted than ever before
Bloomberg reports that corporate leveraging around the world has reached an unprecedented and arresting 29 trillion In 2015 debt reached three times earnings before interest taxes depreciation and amortization a 12 year record An estimated one third of these companies meanwhile are unable to generate enough returns on investment to cover the cost of credit
If this is a debt bubble it only adds to speculation that we re headed for a global recession As I mentioned recently several prominent voices including George Soros and Marc Faber believe recessionary forces are growing stronger precipitated by struggling commodity prices and surging global debt
It might be hard to remember after a nearly seven year equity bull market but we ve been here before
Credit Suisse N CS looked at 14 recessionary pullbacks between 1929 and 2008 and found that the S P 500 Index after lasting an average 298 trading days declined an average 33 percent Some of these recessions obviously lasted longer and were more severe than others such as the most recent one that lasted between 2007 and 2009
But each of these pullbacks Credit Suisse notes provided ample buying opportunities in U S equities Rebounds following the recessions averaged 62 percent 80 percent following the 2007 financial crisis
How to Invest When Stocks Make You Worry Whether or not a recession is imminent I believe it s a good idea for investors to be prepared by having a well diversified portfolio including assets such as gold and municipal bonds Gold has tended to have a low correlation with stocks meaning that even when stocks were tumbling it s managed to retain its value well
The same can be said for short term high quality munis which have been shown to offer a greater amount of stability than some other types of securities even during market downturns
In 2015 munis as represented by the Barclays Municipal Bond Index were actually the top fixed income asset class beating both Treasuries and corporate debt They also outperformed S P 500 Index stocks returning more than double what equities delivered
Muni fund inflows gained momentum in the second half of 2015 as global stock markets began to show signs of trouble and so far this year investors are piling into munis at a rate of about 1 billion per week
The last couple of decades were among the most volatile with the tech bubble and financial crisis challenging markets Out of more than 31 000 equity and bond funds during this 21 year period only 0 12 percent of the total number made up almost completely of municipal and short term bond funds managed to delivered positive returns on a consistent basis
Did Russia Just Blink Several forecasts last week suggest oil prices are unlikely to recover in 2016 and might fall even further
Morgan Stanley says crude could reach 20 per barrel as the U S dollar continues to strengthen The U S Energy Information Administration EIA predicts that we might not see supply and demand start to rebalance and prices recover until late 2017 And the World Bank lowered its 2016 forecast for crude oil prices from 51 per barrel on average to 37 per barrel The downward revision is based on a number of factors including sooner than expected oil exports from Iran a mild winter in the Northern Hemisphere and most significantly continued imbalance between global supply and demand U S producers have been much more resilient than expected to lower oil prices
But talk that meaningful production cuts are on the horizon led oil higher last week helping it achieve its first three day winning streak of the new year In the global production staring contest it appears as if Russia blinked first as it just expressed an interest in reaching terms with the Organization of Petroleum Exporting Countries OPEC on output cuts
Like Saudi Arabia Nigeria Iraq and Venezuela Russia greatly depends on oil exports the revenue from which makes up about half of its government s total revenue The country averaged 10 5 million barrels a day in 2014 making it the world s third largest oil producer after the U S and Saudi Arabia Coupled with Western sanctions for its involvement in Ukraine low prices have wreaked havoc on Russia s economy which contracted 3 7 percent in 2015 and is expected to fall another 1 percent this year The ruble which closely tracks the decline in Brent oil has lost approximately half its value against the U S dollar in the last two years
Reaching a production cap deal with OPEC whose members are collectively responsible for about 40 percent of the world s output would help rebalance supply and demand and firm up prices
Oil has historically bottomed in the month of January and it appears that we finally found a bottom It remains under pressure but we could see oil climb to between 38 and 40 per barrel over the next three months
In the longer term things look more constructive Oil will continue to be the world s most important source of energy for at least the next couple of decades according to a new report from ExxonMobil N XOM We should expect to see a 25 percent increase in energy demand by 2040 which is like adding another North and South America
Looking at transportation fuels natural gas demand is expected to grow the most 300 percent between 2014 and 2040 Jet fuel should climb 55 percent as air travel demand increases in emerging and developing markets
China Still a Long Term Growth Story
By 2040 the world population should surge to nine billion with a greater percentage of people than ever before demanding affordable reliable energy for their homes and businesses
Even though its demand for materials and commodities has cooled in the last year China should continue to see huge consumption growth in durable goods for many years to come as its GDP per capita expands
Back in October Credit Suisse reported that the size of China s middle class had for the first time overtaken the size of the American middle class 109 million adults compared to 92 million As this group increases in number so too rises the demand for durable goods vehicles energy and other things we expect to find in a middle class lifestyle
In a report last week urges readers to focus on the absolute scale of China s economy not just slowing growth
No matter what rate the country grows at in 2016 Orr writes its share of the global economy and of many specific sectors will be larger than ever
For forward looking global investors that s optimistic news indeed
Disclosure This commentary should not be considered a solicitation or offering of any investment product Certain materials in this commentary may contain dated information The information provided was current at the time of publication
All opinions expressed and data provided are subject to change without notice Some of these opinions may not be appropriate to every investor |
XOM | The Consequences Of Crashing Oil Prices | Truth and Consequences
For oil producing countries and oil companies the moment of truth is at hand as the consequences of crashing oil prices cannot be ignored With the possibility that Exxon Mobil N XOM will see its debt rating downgraded and the Russia oil minister saying his open to more talks with OPEC you know that the end may be near
Not only did Exxon Mobil report a whopping 58 drop in fourth quarter earnings it also said it would cut its capital expenditures by 25 this year to 23 2 billion following a 15 reduction in 2015 But what is worse the ratings agency S P put Exxon s triple AAA rating on a downgrade watch which would be the first degrade for the Exxon part of Mobil since the great depression If Exxon Mobil the company that put the big in big oil is on downgrade watch how can smaller companies survive
There are more signs that Russia has had enough of the price collapse Oil seemed to rally on comments by Russian Foreign Minister Sergei Lavrov who said if there is consensus among the Organization of the Petroleum Exporting Countries and non OPEC members to meet then we will meet Dow Jones is also reporting that Iran is in favor of closer contacts with Russia Iraq and Venezuela on issues of oil Ali Akbar Velayati a top adviser to the Islamic republic s supreme leader said Wednesday The news come despite Iran s refusal so far to agree to a production cut and an emergency meeting between producers on how to respond to lower prices Russia and Iran should not experience competition in the area of energy and should work together
This comes as the American Petroleum Institute is signaling the potential for another build in the Energy Information Administration supply report The API said that crude inventories rose 3 8 million bales last week They also reported a big build in gasoline of 6 6m and a slight 400 000 increase in distillate supply
The increase in gas supply came as we saw the impact of demand destruction caused by the East Coast snow and wind storms Also as reported by Platt s Refined product futures were under pressure Tuesday after Colonial Pipeline restarted Line 2 less than 24 hours after closing it and Line 1 to investigate an integrity issue the company said
Colonial restarted Line 1 Monday Lines 1 and 2 carry refined products from Pasadena Texas to Greensboro North Carolina at which point they combine with Line 3 which ends in Linden New Jersey In the physical market Colonial Pipeline pricing for line space for delivery from Pasadena Texas to Greensboro North Carolina was stronger reflecting renewed interest in shipments along 1 37 million b d Line 1 Despite less refinery activity gasoline stocks are expected to have increased 1 5 million barrels last week I think you will see the full impact of the winter storm in this report because no one could drive in New York for a couple of days and throughout the East Coast Price Futures Group analyst Phil Flynn said A snowstorm blanked the Atlantic Coast the weekend of January 23 The US Energy Information Administration said crude inventories rose to 494 92 million barrels in the week to January 22 the highest since at least April 1982 the earliest data on the EIA website showed |
TEVA | Teva Pharm nudges up earnings forecast names new CFO | JERUSALEM Reuters Teva Pharmaceutical Industries TA TEVA nudged up its full year earnings guidance on Thursday after reporting a drop in third quarter profit that broadly met expectations
The world s largest generic drugmaker earned 58 cents per diluted share excluding one time items in the July September period down from 68 cents a year earlier
It cited higher tax expenses and lower operating profit which were partially offset by lower finance expenses
Revenue fell 6 to 4 26 billion due to generic competition for its multiple sclerosis drug Copaxone and declines in sales in the United States Russia and Japan although it posted gains in some of its newly launched drugs
Analysts had forecast Israel based Teva N TEVA would earn 59 cents a share ex items on revenue of 4 24 billion according to I B E S data from Refinitiv
Revenue in North America dipped 9 to 2 05 billion with North American sales of Copaxone down 41 to 271 million Its new migraine drug Ajovy had revenue of 25 million while sales of Huntington s treatment Austedo rose to 105 million from 62 million
Teva is looking to Ajovy and Austedo to boost revenue and help it pay down its huge debt load
Chief E xecutive Kare Schultz said Teva remained on track to achieve a two year restructuring target of 3 billion in spending reductions
Teva said it had legal settlements of 468 million in the third quarter mainly in connection with opioid cases in the United States
Its debt load had fallen to 26 9 billion at the end of September from 28 7 billion three months earlier
For 2019 the company raised its forecast for adjusted earnings per share EPS to 2 30 2 50 from 2 20 2 50 and revenue to 17 2 17 4 billion from 17 0 17 4 billion
Analysts are forecasting EPS of 2 38 on revenue of 17 18 billion
Teva also named Eli Kalif as its new chief financial officer effective Dec 22
Teva s shares were down 1 3 in afternoon trade in Tel Aviv |
TEVA | Exclusive Drugmakers from Pfizer to GSK to hike U S prices on over 200 drugs | By Michael Erman and Carl O Donnell NEW YORK Reuters Drugmakers including Pfizer Inc N PFE GlaxoSmithKline PLC L GSK and Sanofi SA PA SASY are planning to hike U S list prices on more than 200 drugs in the United States on Wednesday according to drugmakers and data analyzed by healthcare research firm 3 Axis Advisors Nearly all of the price increases will be below 10 and around half of them are in the range of 4 to 6 said 3 Axis co founder Eric Pachman The median price increase is around 5 he said More price increases are expected to be announced later this week which could affect the median and range Soaring U S prescription drug prices are expected to again be a central issue in the presidential election President Donald Trump who made bringing them down a core pledge of his 2016 campaign is running for re election in 2020 Many branded drugmakers have pledged to keep their U S list price increases below 10 a year under pressure from politicians and patients Drugmakers often negotiate rebates on their list prices in exchange for favorable treatment from healthcare payers As a result health insurers and patients rarely pay the full list price of a drug Pfizer will hike prices on more than 50 drugs including its cancer treatment Ibrance which is on track to bring in nearly 5 billion in revenue this year and rheumatoid arthritis drug Xeljanz Pfizer spokeswoman Amy Rose confirmed the company s planned price increases She said the company plans to increase the list prices on around 27 of its portfolio in the United States by an average of 5 6 Of the medicines with increases she said 43 of them are sterile injectibles and many of those increases are less than 1 per product GlaxoSmithKline said it will raise prices on more than 30 drugs The company will raise prices on the blockbuster respiratory treatments it delivers through its Ellipta inhaler its recently acquired cancer drug Zejula and on several products in its HIV focused ViiV joint venture according to 3 Axis Advisors Price increases ranged between 1 and 5 Sanofi said it will raise prices on around 10 of its drugs with hikes ranging between 1 and 5 The drugmaker noted the increases are in line with its commitment to not raise prices above medical inflation Teva Pharmaceutical NYSE TEVA Industries Ltd TA TEVA raised prices on more than 15 drugs in some cases by more than 6 according to 3 Axis Advisors A Teva spokesperson said the company regularly reviews prices in the context of market conditions availability and cost of production 3 Axis advises pharmacy industry groups on identifying inefficiencies in the U S drug supply chain and has provided consulting work to hedge fund billionaire John Arnold a prominent critic of high drug prices STAYING OUT OF THE CROSSHAIRS Ian Spatz a senior adviser at consulting firm Manatt Health said that drugmakers could be holding to relatively low price hikes in an attempt to stay out of politicians crosshairs Trump for instance targeted Pfizer after a proposed round of price increases in 2018 saying in a tweet that the drugmaker should be ashamed I m sure many manufacturers are interested in making sure they are not called out on a large list price increase Spatz said The United States which leaves drug pricing to market competition has higher prices than in other countries where governments directly or indirectly control the costs making it the world s most lucrative market for manufacturers Trump a Republican has struggled to deliver on a pledge to lower drug prices before the November 2020 election His administration recently proposed a rule to allow states to import prescription drugs from Canada The administration had previously scrapped an ambitious policy that would have required health insurers to pass billions of dollars in rebates they receive from drugmakers to Medicare patients
The House of Representatives controlled by Democrats passed a bill earlier in December that would cap prices for the country s most expensive drugs based on international prices and penalize drugmakers that do not negotiate with the Medicare insurance program for seniors Trump has threatened to veto the bill saying it would undermine access to lifesaving medicines |
TEVA | Teva to pay 54M to settle suit over sham programs to boost drug sales | The attorney representing two former sales reps at Teva Pharmaceutical Industries TEVA 0 8 announces that the company has agreed to pay 54M to settle allegations that it used sham paid speaker programs to increase sales of MS med Copaxone glatiramer acetate and Parkinson s med Azilect rasagiline beginning in 2003
The whistleblower complaint claimed that programs were sham events since the physician speakers consultants were being paid to write prescriptions a violation of the U S Anti Kickback Statute
Teva lawyers sought a motion for summary judgement but it was rejected by a district court judge about 11 months ago |
XOM | Statoil and ExxonMobil win Irish oil licenses | OSLO Reuters Oil majors Statoil OL STL and ExxonMobil N XOM have been awarded six options to search for oil and gas offshore Ireland in the country s latest licensing round Statoil said on Wednesday
The two firms each hold 50 percent stakes in all the acreage Statoil will have four operatorships while ExxonMobil will have the remaining two
Work on the licenses is for the time being limited to carrying out seismic surveys during 2016 and 2017 with the option to drill at a later stage depending on the analysis of the data Statoil said
This supports Statoil s exploration strategy of early access at scale and enables us to apply the exploration knowledge and experience we have gained globally and specifically on the conjugate margin offshore Newfoundland the company added |
XOM | Exxon Mobil sees output up slightly as cost cutting continues | Investing com Exxon Mobil NYSE XOM said on Wednesday its output would rise slowly through 2017 as it continues cutting costs
But the company said it could increase its spending if the right opportunities arose
Exxon said it expects its 2017 capital spending to be below its planned spending of 23 billion this year
It also said it is on track to start up 10 new oil and gas projects by end 2017 adding 450 000barrels of oil per day to its production capacity
Oil prices have fallen around 70 since mid 2014 prompting major companies to slash budgets for expensive projects |
XOM | Exxon Mobil eyes acquisitions forecasts lowered spending | By Michael Erman and Jarrett Renshaw NEW YORK Reuters Exxon Mobil Corp N XOM said on Wednesday it would continue to cut spending as long as crude prices remain low but the world s largest publicly traded oil company added it may look at potential acquisitions in a bid to offset a dip in production Exxon which has a triple A credit rating tapped the debt market this week with a 12 billion deal that has led analysts to speculate the oil major may be gearing up for an acquisition spree We have the financial flexibility to pursue attractive opportunities and can adjust our investment program based on market demand fundamentals Exxon Chief Executive Rex Tillerson said in a statement as he and other company executives met with analysts in New York Texas based Exxon said it expects its capital spending which has been falling since hitting a peak of 42 5 billion in 2013 to drop next year from the 23 2 billion it now plans to spend this year It spent 31 1 billion in 2015 Early last year Exxon said its average annual spending would be around 34 billion over the next several years The company also said on Wednesday that it is on track to start up 10 new oil and gas projects through the end of next year which would add 450 000 barrels of oil equivalent per day boed to its production capacity But it expects long term production of between 4 0 million and 4 2 million boed through 2020 compared to 4 25 million boed in the last quarter of 2015 That outlook is based on a Brent oil price LCOc1 of 40 to 80 a barrel Exxon said Brent oil currently trades at just under 37 a barrel Oil prices have fallen some 70 percent since mid 2014 prompting major companies to slash budgets for expensive projects designed to bring hard to find new discoveries online
Exxon s oil and gas production rose 3 2 percent in 2015 as the company s downstream refining unit provided some insulation against the impact of falling oil prices on its upstream exploration and production unit |
MRO | Analysts Estimate Marathon Oil MRO To Report A Decline In Earnings What To Look Out For | Marathon Oil MRO is expected to deliver a year over year decline in earnings on lower revenues when it reports results for the quarter ended June 2019 This widely known consensus outlook gives a good sense of the company s earnings picture but how the actual results compare to these estimates is a powerful factor that could impact its near term stock price
The stock might move higher if these key numbers top expectations in the upcoming earnings report which is expected to be released on August 7 On the other hand if they miss the stock may move lower
While the sustainability of the immediate price change and future earnings expectations will mostly depend on management s discussion of business conditions on the earnings call it s worth handicapping the probability of a positive EPS surprise
Zacks Consensus Estimate
This energy company is expected to post quarterly earnings of 0 14 per share in its upcoming report which represents a year over year change of 6 7
Revenues are expected to be 1 36 billion down 4 1 from the year ago quarter
Estimate Revisions Trend
The consensus EPS estimate for the quarter has been revised 48 73 lower over the last 30 days to the current level This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period
Investors should keep in mind that the direction of estimate revisions by each of the covering analysts may not always get reflected in the aggregate change
Price Consensus and EPS Surprise
Earnings Whisper
Estimate revisions ahead of a company s earnings release offer clues to the business conditions for the period whose results are coming out Our proprietary surprise prediction model the Zacks Earnings ESP Expected Surprise Prediction has this insight at its core
The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate The idea here is that analysts revising their estimates right before an earnings release have the latest information which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier
Thus a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate However the model s predictive power is significant for positive ESP readings only
A positive Earnings ESP is a strong predictor of an earnings beat particularly when combined with a Zacks Rank 1 Strong Buy 2 Buy or 3 Hold Our research shows that stocks with this combination produce a positive surprise nearly 70 of the time and a solid Zacks Rank actually increases the predictive power of Earnings ESP
Please note that a negative Earnings ESP reading is not indicative of an earnings miss Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and or Zacks Rank of 4 Sell or 5 Strong Sell
How Have the Numbers Shaped Up for Marathon Oil
For Marathon Oil the Most Accurate Estimate is lower than the Zacks Consensus Estimate suggesting that analysts have recently become bearish on the company s earnings prospects This has resulted in an Earnings ESP of 0 65
On the other hand the stock currently carries a Zacks Rank of 3
So this combination makes it difficult to conclusively predict that Marathon Oil will beat the consensus EPS estimate
Does Earnings Surprise History Hold Any Clue
While calculating estimates for a company s future earnings analysts often consider to what extent it has been able to match past consensus estimates So it s worth taking a look at the surprise history for gauging its influence on the upcoming number
For the last reported quarter it was expected that Marathon Oil would post earnings of 0 06 per share when it actually produced earnings of 0 31 delivering a surprise of 416 67
Over the last four quarters the company has beaten consensus EPS estimates three times
Bottom Line
An earnings beat or miss may not be the sole basis for a stock moving higher or lower Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors Similarly unforeseen catalysts help a number of stocks gain despite an earnings miss
That said betting on stocks that are expected to beat earnings expectations does increase the odds of success This is why it s worth checking a company s Earnings ESP and Zacks Rank ahead of its quarterly release Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they ve reported
Marathon Oil doesn t appear a compelling earnings beat candidate However investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release |
MRO | Marathon Oil MRO Surpasses Q2 Earnings And Revenue Estimates | Marathon Oil MRO came out with quarterly earnings of 0 23 per share beating the Zacks Consensus Estimate of 0 11 per share This compares to earnings of 0 15 per share a year ago These figures are adjusted for non recurring items
This quarterly report represents an earnings surprise of 109 09 A quarter ago it was expected that this energy company would post earnings of 0 06 per share when it actually produced earnings of 0 31 delivering a surprise of 416 67
Over the last four quarters the company has surpassed consensus EPS estimates four times
Marathon Oil which belongs to the Zacks Oil and Gas Integrated United States industry posted revenues of 1 43 billion for the quarter ended June 2019 surpassing the Zacks Consensus Estimate by 5 44 This compares to year ago revenues of 1 42 billion The company has topped consensus revenue estimates three times over the last four quarters
The sustainability of the stock s immediate price movement based on the recently released numbers and future earnings expectations will mostly depend on management s commentary on the earnings call
Marathon Oil shares have lost about 15 2 since the beginning of the year versus the S P 500 s gain of 15
What s Next for Marathon Oil
While Marathon Oil has underperformed the market so far this year the question that comes to investors minds is what s next for the stock
There are no easy answers to this key question but one reliable measure that can help investors address this is the company s earnings outlook Not only does this include current consensus earnings expectations for the coming quarter s but also how these expectations have changed lately
Empirical research shows a strong correlation between near term stock movements and trends in earnings estimate revisions Investors can track such revisions by themselves or rely on a tried and tested rating tool like the Zacks Rank which has an impressive track record of harnessing the power of earnings estimate revisions
Ahead of this earnings release the estimate revisions trend for Marathon Oil was mixed While the magnitude and direction of estimate revisions could change following the company s just released earnings report the current status translates into a Zacks Rank 3 Hold for the stock So the shares are expected to perform in line with the market in the near future You can see the complete list of today s Zacks 1 Rank Strong Buy stocks here
It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead The current consensus EPS estimate is 0 09 on 1 36 billion in revenues for the coming quarter and 0 61 on 5 33 billion in revenues for the current fiscal year
Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well In terms of the Zacks Industry Rank Oil and Gas Integrated United States is currently in the bottom 31 of the 250 plus Zacks industries Our research shows that the top 50 of the Zacks ranked industries outperform the bottom 50 by a factor of more than 2 to 1 |
CSCO | Is It Time To Go Long On Cisco Systems | The year 2015 was not a great one for Cisco Systems Inc NASDAQ O CSCO though it was not a bad one However the company has been a consistent performer with its earnings topping expectations The strong fiscal second quarter numbers boosted the sentiments of investors by lifting its stock close to 10 when the overall market was witnessing a significant drop on Thursday The current year appears to have started well for the company The question is whether it can sustain the momentum throughout the year The company is making earnest efforts to see that the current year is better than the last year to say the least by focusing on acquisitions to boost its software as well as services That included security cloud video and collaboration markets The year 2015 witnessed an accelerated pace of acquisitions as the company acquired eleven companies compared to six in the preceding year Let s look at the positives as well as the negatives to take a call on going long
China Plays A Crucial Role
Cisco Systems Inc NASDAQ CSCO s results for the second quarter demonstrated both strengths and weaknesses The macroeconomic environment has been a challenging one and it did well to report better than expected revenues One of the positive things was that the company was able to overcome the issues faced in China that have hurt its business in the past One of the reasons it could not perform very well in the region was the suspicion among the corporate or the government entities that non Chinese hardware might be used by spies The emergence of alternative products from the domestic manufacturers like Huawei Technologies has also hurts its business in the past
That appeared to be a thing of the past as far as Cisco Systems Inc NASDAQ CSCO was concerned In November the company reported that it was able to witness a 40 surge in the order rate in China If anyone considered that as a one off event the subsequent developments do not support the theory A few days back the network switch maker indicated that orders from China jumped 64 in the second quarter ended in January The surge in the order was fueled by video equipment demand The company is likely to maintain the momentum in getting the orders from China which would be a positive for it
Positives And Negatives From 2Q
Cisco Systems Inc s NASDAQ CSCO revenue in routing equipment division advanced 5 in the second quarter which faced rough weather lately and even shrank Only communications carriers purchase the kind of hardware and their buying of the products steadily helped it to achieve the growth Video equipment is witnessing hectic activity among the carriers As a result the segment witnessed 37 uptick in the recent quarter Its other divisions security as well as collaboration products also witnessed the growth of 11 and 3 respectively Its other products surged 31 while services revenue advanced 2 The company gained from its tactical portfolio that focused on companies as well as countries than ever before on digitizing everything That was because its focus or marketing was not restricted to IT alone
The strength in some of the segments allowed it to gain 2 top line to reach 11 83 billion However there were also weaknesses for Cisco Systems Inc NASDAQ CSCO that was due to the market conditions For instance its Switching revenue fell 4 YOY while revenue from Data Center dipped 3 Both the segment reversed the trend witnessed in the first quarter Its CEO Chuck Robbins said that signs of caution started towards the close of the quarter among some corporate customers He also indicated that the companies have started to held back orders on non essential purchases like the switching system used on the corporate campuses That meant the customers were giving a pause and were trying to adjust to the current market conditions
Identification Of Four Key Areas
Cisco Systems Inc NASDAQ CSCO four key areas for accelerating its innovation as well as portfolio transformation Accordingly the company is looking to define the next generation of networking starting with the data center with its ACI platform The second key factor was the focus towards fueling growth in its security business which assumes greater importance in the wake of increased threats from cyber criminals The third factor is shifting its tactics more towards its portfolio that would be delivered in on premise as well as cloud based SaaS models These three key factors should be good enough to keep propelling growth Aside from that the company plans to use M A as a tool to support its internal innovation in the key areas of growth
from these Cisco Systems Inc NASDAQ CSCO stands to gain from the acquisition of Jasper Technologies for 1 4 billion The confidence was due to its role in IoT and that it could provide recurring revenues to the company IoT devices are growing fast and that should offer an influx of data which requires to be managed The acquisition should help in offering software solutions to analyze the data That would also support the hardware business and could provide synergy to growth Similarly the company s sports stadium connective effort is a bullish one because of the growing demand for connected services at sports venues This could come with high growth potential with considerable potential for revenue and might go beyond the sports venues
Valuation
Cisco Systems Inc NASDAQ CSCO s return on assets and equity for the trailing twelve month period was 8 9 and 16 4 respectively compared to the industry average of 5 6 and 11 5 respectively Its price to earnings for the same trailing twelve month period was 12 1 times compared to the industry average of 19 6 times That meant there is potential for upside rewards It had free cash flow of 3 6 billion
Conclusion
Cisco Systems Inc NASDAQ CSCO has not been an aggressive player but its performance has always been steady It rarely misses the expectations Currently the stock is trading a little over 2 above the 52 week low price reflecting the market conditions While there are some weaknesses the positive should be able to offset it Currently it seems to be there
Disclaimer The opinions and data expressed herein by the author are not an investment recommendation and are not meant to be relied upon in investment decisions The author is not acting in an investment advisory capacity nor is this an investment research report The author s opinions expressed herein address only select aspects of potential investment in securities of the company or companies mentioned and cannot be a substitute for comprehensive investment analysis Any analysis presented herein is illustrative in nature limited in scope based on an incomplete set of information and has limitations to its accuracy The author recommends that potential and existing investors conduct thorough investment research of their own including detailed review of the companies SEC filings and consult a qualified investment advisor The information upon which this material is based was obtained from sources believed to be reliable but has not been independently verified Therefore the author cannot guarantee its accuracy Any opinions or estimates constitute the author s best judgment as of the date of publication and are subject to change without notice |
CSCO | Will Weaker Demand Impact Palo Alto Networks Earnings | Palo Alto Networks Inc N PANW Information Technology Communications Equipment Reports February 25 After Market Closes
Key Takeaways
The Estimize consensus which more heavily weights the most accurate analysts and recent estimates is calling for EPS of 0 41 and revenue of 319 27 slightly higher than the Estimize mean and Wall Street
Shares of Palo Alto Networks have been hit hard by the broader market sell off and weaker demand for software security solutions
The company has perennially beat on the top and bottom line reporting better than expected earnings in each of the past 5 quarters
What are you expecting for PANW
Cybersecurity firm Palo Alto Networks PANW is scheduled to report fiscal second quarter earnings February 25 after the market closes The company has perennially beat on the top and bottom line reporting better than expected earnings in each of the past 5 quarters This quarter might fare differently as investors have grown concerned following decelerated growth from industry leaders Fortinet Inc O FTNT Checkpoint Systems Inc N CKP and Fireeye Inc O FEYE Consequently shares of Palo Alto Networks have plunged 29 5 in 2016 by virtue of weaker demand and spending in the software security space
This quarter the Estimize consensus a weighted consensus that more heavily represents the most accurate analysts and recent estimates is calling for EPS of 0 41 1 cent higher than the Estimize mean and 2 cents higher than Wall Street while revenue expectations of 319 27 are roughly 2 million greater than the Street Compared to the same period last year this projects to be a 113 increase on the bottom line and 46 increase in sales The company has historically beat EPS measures eclipsing Estimize 80 of the time and Wall Street a resounding 96 of the time A significant source of concern in the software security space has arisen by virtue of the tight spending environment and competition from tech giants like Cisco Systems Inc O CSCO An increasingly competitive landscape could necessitate PANW to increase its spending on sales and marketing thereby limiting its current margin leverage Moreover Palo Alto may see limited traction in new product areas such as Traps and WildFire
Nevertheless Palo Alto Networks has reported consistent growth over the past 8 quarters with no sign of waning In its past earnings call the company reported a 29 YOY growth in its customer base driven by sales investmentments Furthermore a strong billings base and ramped up adoption for additional subscription services have stimulated sound financials The company s strategic focus on expansion should bode favorably for the company come this Thursday
Do you think PANW can beat estimates |
XOM | Here s How You Fix The Oil Market | Here is a giant gift for all those clueless oil executives out there in North America What you are currently doing or not doing by being effectively a deer stuck in headlights isn t working You cannot take a clue from the miserable strategy employed be the mining industry where they are waiting for each other to go out of business meanwhile the entire industry as a group is sinking like the Titanic And unfortunately the consulting industry doesn t know jack shit about energy strategy other than compliance auditing taxing and ancillary ways to cut costs I admit this strategy is counterintuitive requires thinking about the oil problem from a slightly different perspective and requires actual action on oil executives behalf and could even be labeled out of the box However it will definitely work meets the simplistic criterion i e often too complex solutions are doomed to fail and gets the job done with immediate results that reinforce the fact that this is fixing the oil market
Flawed Strategy
Here is what is flawed with the current strategy The current strategy has everyone lowering costs renegotiating contracts raising more cash through stock dilution offerings and extending credit on behalf of the banking industry And additionally has shorts pounding the oil futures market devaluing your core asset by the day All the while the big guys wait for the smaller firms to go out of business with the idea of why take the risk of buying the smaller firms in a risky price environment especially since their credit ratings could take a hit they would take on more debt they can probably get assets cheaper in the future and this could put their dividend at risk which is the hallowed holy cow for these oil executives
However why this strategy is flawed just like with the mining industry is that you have a core asset in your reserves you are losing the asset in the form of lower reserves and you are cutting long term Cap Ex investment in future reserves at the same time you thus are lowering the long term value of the company What these big oil companies are missing is that by letting the price drop so low by not taking action sure they are harming the smaller companies but look not only at your stock depreciation but at your revenues and factor this into the cost benefit analysis of your current No Action strategy Compare this No Action strategy with what I am going to propose to fix this problem
Consolidation Consolidation Consolidation Then More Consolidation
The solution is to buy up the smaller players and I mean start right now Take production offline since they are not going to voluntarily do it because they want to continue pumping for as long as possible to stay in business regardless of price Thus by de facto hurting the entire industry with irrational poor decision making which is counterproductive to the market as a whole
Sure it will cost the big players more money up front than buying these same assets in bankruptcy court but bankruptcy court proceedings can drag on and pumping operations often continue even during bankruptcy court all of which have costs associated with this strategy that should be factored into the analysis of the bankruptcy option of acquiring assets Not to mention lower revenues for the next 9 months waiting for this bankruptcy scenario to play out in the market
Therefore buy the smaller players now take the assets offline until the US Domestic production goes down to 5 to 6 million barrels per day and you get the short money out of the market probably 15 worth of shorts in the market return the market price to a more sustainable level boost revenues at the large oil companies relative to 32 oil and bolster the health of the overall oil market
Immediate Positive Market Reaction
This is the strategy it is actually relatively easy to do it will have immediate effects and there are definitely just too many oil companies currently in the market Once the oil inventories come down which they are only about 100 million barrels of storage over the average necessary for 80 plus oil and reducing U S output to 5 or 6 million barrels per day will definitely bring down the inventories rather quickly But more immediate is the fact that markets anticipate thus immediately boosting the core commodity input oil which is responsible for revenue streams
Take Advantage to Consolidate While it is easy to justify to Regulators
There is no antitrust reason why these mergers will not be approved as look at how many oil companies new oil venture startups that have come on line over the last 10 years and the broad diversity of oil companies in the industry right now Compare this to 3 cable companies in the entire cable industry 5 cell phone firms in that industry the massive consolidation in the drug industry and the monopolies in the internet advertising and search business There is plenty of room for consolidation on a massive scale in the oil sector and this is what needs to happen and happen right now to turn the oil market around
Investment Banking Advising Fee Generation
The beauty of this strategy is once the first major deal is announced in the industry then all the rest of the big players rush to get their dance partners and the consolidation herd mentality takes full effect and the price of oil responds in direct proportion to the announced consolidations in the industry long before the fundamentals Markets are forward looking and the oil price will move long before the fundamentals There is even a huge carrot for Wall Street Investment Banks as this strategy garners huge underwriting and advising fees for these consolidation deals I am giving you the Investment Banks the blue print for printing money over the next two years in an overall challenging investment banking environment get to work advising
Market Solution OPEC
Think of this as the market solution version of an OPEC You buy up irrational competitors hurting everyone s opportunities by producing in a suicidal fashion You then take this supply offline And only bring these wells back online when oil inventories are reduced prices have recovered demand is sufficient to handle new supply Consequently you bring the offline production back to market gradually as the market can handle it sort of what OPEC is supposed to be doing as a responsible and effective resource manager
OPEC Would No Longer be the Only One Cutting Supply
Furthermore once this consolidation occurs in US Production it wouldn t be far from crazy to think that OPEC would then reduce production at least back to the 30 million barrels per day level And thus they wouldn t be the only ones cutting production as they have stated numerous times is their main argument for not acting like a responsible cartel and reducing production in an over supplied oil market You don t give away your valuable resource by devaluing its market value ever this is just bad philosophical theory beyond the economics and fundamentals of the business case
Rational Market Behavior De Beers
We don t have to look far for rational behavior in this area in De Beers In the Diamond Industry where when there was a bunch of new production coming online out of Africa bad political and social optics which were devaluing their core commodity resource and lots of market fragmentation that was hurting the diamond market on the whole What did they do They bought up a bunch of this production and took it offline The short sighted shale producers who had no clue what they were doing from an economic theory perspective are the irrational players in the oil market They failed to realize basic financial and economic principles That the market would not support bringing an additional 4 to 5 million barrels per day of new supply in a global oil market that was not modeled or built around the US Producing that much oil and not have a dramatic drop in prices
In any cash flow analysis what were the shale producers thinking was going to happen to oil prices over the next five years if they were successful When shale production went online existing oil inventories were already well above their previous five year averages and were trending higher It seemed shale analysis only factored in the current oil price and not the underlying fundamentals of the existing supply and demand equation in the oil market They extrapolated their revenue models forward only taking into account the immediate pricing environment in the oil markets
Responsible Production for Longer Term Price Stability
The shale producers are the bad guys here they are the rogue diamond mining operations in Africa bringing on additional supply that disrupts the entire market which threatens not only their own existence but the more established players in the industry The solution is simple buy them up stop their production shelve it until oil inventories come down and boost oil prices to more long term sustainable healthy levels This makes for responsible long term investing in the oil market which is in everyone s long term interest for a stable oil price Bring back new supply from shale operations as the market can bear it based upon actual oil demand in the market grounded upon global growth As global demand picks up you bring more shale gradually to meet this new demand
Shale Oil is Peak Energy Demand Solution
There is a place for shale oil as we have seen OPEC is pumping near max capacity and it looks like it is around 33 million barrels per day Think of shale oil as the peak oil supply when demand or inventories are low to bring online to deal and handle peak demand conditions and then go offline as the market dictates like natural gas used to be in the electricity market Let OPEC and traditional oil supply be the baseline provider of the market and shale to provide peak demand or as the market dictates
For example if global demand picks up and can handle the US pumping 10 million barrels per day then fine shale can pump away and be part of the baseline supply However that is not the case currently and it makes rational sense to adjust to market dynamics and take shale offline until U S Inventories come down oil prices rise demand picks up and the overall oil industry is on more stable long term footing It hurts the big guys just as much as the little guys if you think of the entire cost benefit analysis of tanking the entire oil market just look at the mining industry for similar results
Cut US Production to 6 Million Barrels per day
The only solution is to cut oil production the US Producers need to buy up the smaller ones take production offline so that rational decisions can be made for the market as a whole because currently it is rational for the hangers on in the shale industry to do the irrational for the overall market You buy them up and now it is in your rational best interest to take this production offline bringing US Production down to 6 million barrels per day Quit worrying about what OPEC does get the 15 worth of shorts off your main revenue producing commodity s back all the while bolstering up your cratering by the moment revenue numbers
Control Your Own Destiny
Now the correlation in cutting supply is in your best interest as you the Exxon N XOM Mobil s of the world have added to your shale reserves boosted quarterly revenue by boosting oil prices and are rationalizing the market by reducing existing oil inventories the interests are aligned
Consolidation and major consolidation happening right now is the only viable solution for solving the problems of the oil market now get to work and start negotiations I expect to hear some acquisitions over this first quarter now that I have given you the blueprint for solving your problems You can send me a Christmas card as a thank you note given that you are too unwise to get this on your own or you would have already started acquiring assets and reducing supply 6 months ago
I am not a big fan of waiting for things to happen I like to be proactive and make things happen In my book this is the preferred strategy course and the Major Oil Executives need to start making things happen in a proactive fashion right now As a result cutting production needs to happen tomorrow not waiting for the marginal shale producers to fall by the wayside think how much quarterly revenue you have already lost by employing this sit on your collective asses strategy for all of 2015 |
XOM | Market Rebounds While Oil Hits 12 Year Lows | U S and European stock markets rebounded on Tuesday while Asian shares stabilized on Wednesday s early Asian trading session Crude oil dipped to 12 year lows as it fell below 30 a barrel threatening many U S shale companies The latest seven day losing streak fueled by an ongoing global supply glut and concerns over future demand have erased nearly a fifth of crude oil prices since the beginning of the year and around 70 since 2014 As of this writing crude oil regained some of its losses adding 1 05 to trade at 30 76 a barrel Brent crude gained 0 58 to trade at 31 12 a barrel The dramatic slide in energy pricing has far reaching effects Exxon Mobil N XOM and Royal Dutch Shell L RDSa have seen dramatic declines in share value and have been forced to cut back on spending and workforce while counties such as Russia who rely heavily on oil as a revenue stream are in danger of losing significant cash reserves Even Saudi Arabia which is at least partly responsible for near record output volumes from OPEC members may find current pricing to be unsustainable according to some analysts
Despite oil s massive declines European and U S shares gained some ground on Tuesday snapping 4 and 8 day losing streaks respectively Major U S indexes started the day higher but later moved into negative territory as oil prices stumbled to 12 year lows Regardless stocks rallied towards the end of the session led by the technology and health care sectors The Standard Poor s 500 index climbed 15 01 points or 0 78 to trade at 1 938 68 Eight of index s main sectors closed in positive territory The Dow Jones Industrial Average added 117 65 points or 0 72 to trade at 16 516 22 and the Nasdaq Composite rose 47 93 points or 1 03 to trade at 4 685 92 breaking an eight day losing streak European stocks also rose on Tuesday breaking a four day losing streak The Stoxx Europe 600 index gained 0 88 to trade at 343 22 after posting its lowest level since September during yesterday s session The German DAX 30 gained 1 63 to 9 985 43 France s CAC 40 rose 1 53 to 4 378 75 and the U K s FTSE 100 index 0 98 to close the day at 5 929 24
This week s economic data releases continue with today s U S crude oil inventory reports followed by the U K interest rate decision the European Central bank s monetary policy meeting and U S unemployment claims on Thursday The week will conclude with Friday s release of U S retail sales industrial production and consumer sentiment |
XOM | Oil Tries To Shake Off Weakness In Asian Markets | Shake It Off
Oil is trying to shake off weakness in the Asian stock markets after China s General Administration of Customs reported that China s December crude imports increased by 9 3 over a year ago sucking in about 33 2 million metric tons of oil Also a hint that Saudi Arabia and Russia might be warming to an idea of a production cut This come as bearish bets on the February 25 00 crude oil put buying hit a record high The bears are doubling down on an imminent price collapse over 7 00 a barrel by February 17th which by any measure is a tall order
A big part of that bet is the expectation that demand will fall seasonally overwhelming storage and supply Yet for at least this week even with an expected increase in supply we should see storage fall in Cushing Oklahoma as Canadian oil sands producers start to cut output Global rig counts also are beginning to fall and even as OPEC continues to try to add to output oil production elsewhere is falling
Yet oil is seeing some support after Dow Jones reported that there are signs that top oil exporter Saudi Arabia and Russia are more flexible now in considering a production cut to help stabilize crude markets Quoting Iraq s oil minister We can see some flexibility from Saudi Arabia and Russia but this should be finalized and we should hear some solid suggestions coming from all parts at least from OPEC because it is useless to go to a meeting without deciding on a plan Oil Minister Adel Abdul Mahdi told reporters on the sidelines of an energy conference in Kuwait City Otherwise this will backfire we have to see something official he said adding that Iraq is willing to cooperate on a production cut if others cooperate
Dow Jones also is reporting that Kuwait s OPEC Governor Nawal al Fuzaia hinted on Tuesday that the Organization of the Petroleum Exporting Countries is ready to cut production in an effort to stem the persistent slump in oil prices The governor told an energy forum in Kuwait that the cartel is ready to cooperate with others to stabilize the oil market according to media reports OPEC is willing to cooperate with producers outside the group if they show that they are serious about cooperating with OPEC Non OPEC producers keep on making statements that they are willing to cooperate but the reality is different she said according to Dow Jones The FT reported that OPEC Secretary Abdalla El Badri said future oil production would falter unless countries both inside and outside Opec co operated to end a supply glut It is crucial that all major producers sit down to come up with a solution to this The market needs to see inventories come down to levels that allow prices to recover and investments to return Mr El Badri said in a speech at London s Chatham House
Dow Jones is also reporting
A downward revision by energy giant Exxon Mobil Corp N XOM on its estimate for China s annual energy demand growth highlights such fear On Monday the company cut its forecast for annual energy demand growth in China by almost a 10th to 2 2 a year through 2025 Over a decade the revision amounts to more than Brazil s current annual oil consumption Exxon also predicts that China s thirst for energy will peak by 2030
But when are we too bearish Bloomberg News is reporting that bets that crude oil will retreat below 25 00 a barrel have reached an all time high as stockpiles continue to grow Open interest or the amount of total contracts outstanding for March West Texas Intermediate crude 25 00 put options rose to 29 023 on Jan 22 the highest among all March WTI options The puts expire on February 17th Front month WTI futures dropped to 26 19 on the New York Mercantile Exchange on Jan 20 the lowest since May 2003 Crude stockpiles at Cushing Oklahoma the delivery point for WTI futures climbed to 64 2 million barrels in the week ended Jan 15 the highest level since the Energy Information Administration started to track weekly data in 2004 |
XOM | Shell ready for more cost cuts as earnings fall 87 percent on weak oil prices | By Karolin Schaps and Ron Bousso LONDON Reuters Royal Dutch Shell L RDSa Europe s largest oil company reported its lowest annual income in over a decade on Thursday and said it would take further steps to cut costs to cope with weak oil prices if needed Shell whose shareholders last week approved its takeover of rival BG Group L BG said 2015 income fell 87 percent to 1 94 billion in line with analysts estimates as its oil and gas production unit took a big hit from slumping oil prices Shares in Shell which offer a dividend yield of above 8 percent were trading up 6 4 percent at 5 36 a m ET outperforming the European oil and gas company index which was up 3 4 percent Most divisions came in towards the top end of management s guidance range which we view as positive said Biraj Borkhataria equity analyst at RBC Capital Markets Shell s earnings are the latest demonstration of how badly oil producers are suffering from a 75 percent fall in oil prices since mid 2014 The world s largest oil company ExxonMobil N XOM this week reported its smallest quarterly profit in more than a decade while BP s 2015 loss was its biggest ever Norway s Statoil said on Thursday it would cut 2016 capital expenditure capex by 1 7 billion year on year while U S producer ConocoPhilips reduced its quarterly dividend Shell will take further impactful decisions to manage through the oil price downturn should conditions warrant that Chief Executive Ben van Beurden said in a statement Shell maintained its annual dividend payment of 1 88 per share Shell is reducing investment cutting nearly 10 000 jobs and selling assets to cope with the downturn The CEO told reporters he believed oil prices had reached or were near the bottom of the cycle pointing to growing demand In order to lower spending Shell has scrapped multi billion pound projects over the past year including a controversial exploration project in the Alaskan Arctic Sea the Bab sour gas field in Abu Dhabi and Carmon Creek oil sands project in Canada The company approved only four new projects last year and investment decisions are expected to remain scarce in 2016 This strategy has started to drag down Shell s reserve replacement ratio a metric used to reflect new reserves added relative to the amount produced which was negative in 2015 for the first time in around 12 years While we re not entirely comfortable with a negative number it s not the most important thing today Shell Chief Financial Officer Simon Henry told reporters He said the additions of BG s reserves once the takeover completes would help Shell maintained its 33 billion combined Shell BG capital expenditure budget for 2016 Capital spending fell to 28 9 billion in 2015 down 8 4 billion year on year Shell s fourth quarter current cost of supplies CCS earnings excluding identified items its preferred way of measuring profits fell 44 percent to 1 83 billion Its downstream business benefited from lower fuel prices contributing a profit of 1 5 billion in the fourth quarter
Shell sold 5 5 billion worth of assets in 2015 it said |
XOM | Judge who could replace Scalia worked on controversial cases for business | By Lawrence Hurley WASHINGTON Reuters One possible contender to replace Justice Antonin Scalia on the U S Supreme Court is an Indian American appeals court judge Sri Srinivasan who has pro business credentials and a stellar resume If he was nominated his background may make it more politically challenging for Republicans as they plan to block anyone put forward by President Barack Obama Srinivasan 48 has served on the U S Court of Appeals for the District of Columbia Circuit since he was confirmed on a 97 0 bipartisan vote in the U S Senate in May 2013 Republican senators who supported him then would likely be asked to justify why they couldn t back him for the Supreme Court Many names are likely under consideration and the White House has not tipped its hand but recent Supreme Court appointments have tended to be appeals court judges and the appeals court in Washington on which Srinivasan serves has often been a springboard to the high court Scalia himself served on the court as did other Supreme Court members Chief Justice John Roberts Justice Clarence Thomas and Justice Ruth Bader Ginsburg The White House said on Sunday that Obama will wait until the U S Senate is back in session before making a nomination The Senate returns from recess on Feb 22 Republicans have called for Scalia s seat to remain open so that the next president who would take office in January 2017 can nominate a replacement Other judges Obama could consider appointing include Paul Watford a black man who serves on the 9th U S Circuit Court of Appeals and Jacqueline Nguyen a Vietnamese American woman who serves on the same court as Watford Little is known about Srinivasan s views on divisive social issues like abortion and affirmative action But as a senior Justice Department lawyer in 2013 he was part of the legal team that successfully urged the high court to strike down the Defense of Marriage Act a law that restricted the definition of marriage to heterosexual couples for the purposes of federal benefits The ruling helped pave the way for the court s ruling in June 2015 that legalized gay marriage nationwide Srinivasan could not be reached for comment REPRESENTED EXXON RIO TINTO In private practice prior to his appointment to the appeals court Srinivasan successfully represented former Enron Corp CEO Jeff Skilling in a Supreme Court case The Supreme Court narrowed the reach of the so called honest services fraud law invalidating one theory used by prosecutors for Skilling s conspiracy conviction and ordering further appeals court review Despite the high court ruling Skilling s conviction was later upheld by an appeals court Srinivasan also represented Exxon Mobil Corp N XOM in a lawsuit alleging human rights abuses in Indonesia and mining giant Rio Tinto L RIO in a similar case about its activities in Papua New Guinea Both cases concerned in part whether a law called the Alien Tort Statute allows such cases to be heard in U S courts The Exxon case is still ongoing The Rio Tinto lawsuit was dismissed His work during two stints with the O Melveny and Myers law firm prompted expressions of concern from liberal groups and unions that normally back Democratic judicial nominations when he was nominated to the appeals court in 2012 He has had a lengthy career in public service serving in the Justice Department during both the Obama and George W Bush administrations Under Bush he had a junior role while under Obama he was a political appointee serving as the top deputy to the solicitor general Srinivasan was born in Chandigarh India and grew up in Lawrence Kansas where his father was a professor at the University of Kansas If appointed he would be the first Indian American to serve on the Supreme Court He played basketball in high school and then attended Stanford for undergraduate business and law degrees yet never lost his allegiance to the University of Kansas Jayhawks That was a theme of the judicial dignitaries that saluted him at his 2013 investiture for the appeals court as was the fact that when he was an advocate before the Supreme Court he carried in his pockets for good luck the socks his twin son and daughter wore when they were newborns Srinivasan s bipartisan credentials are lengthy He was a law clerk to Supreme Court Justice Sandra Day O Connor now retired a 1981 appointee of Republican President Ronald Reagan At Srinivasan s confirmation hearing he was backed by conservative Texas Republican Senator Ted Cruz who is now running for president We have been friends a long time so I am hopeful that our friendship will not be seen as a strike against you by some Cruz who is known for having tense relationships with Senate colleagues joked at the time A spokesman for Cruz said the senator would not be commenting on any possible Obama nominee reaffirming that Cruz believes the nomination should be left to the next U S president |
MRO | Marathon Oil Bids Adieu To UK To Deepen Focus On US Plays | Marathon Oil NYSE MRO recently closed the divestment of North Sea operations marking a complete exit from the United Kingdom In accordance with the deal that was inked in February 2019 the company jettisoned a 40 operating stake in the Greater Brae Area and 28 stake in BP plc NYSE BP operated Foinaven oilfield to RockRose Energy for 95 million Deal Benefits for RockRoseThe transaction is in line with RockRose s intention of bolstering operations in the North Sea region and uplifting the firm s reserves and production forecast The deal added 28 4 million barrels of oil equivalent BOE to its proved and probable reserves which came in at 62 9 million BOE as of March 2019 Anticipated output from acquired assets is likely to be around 13 000 BOE per day in turn raising RockRose s total net production in 2019 to approximately 24 000 BOE Notably this London based firm has been exploring many acquisition opportunities over the past couple of years to have improved operations of scale in the North Sea In this regard in 2017 the company had snapped up assets from Idemitsu Petroleum IK Limited Egerton Energy Ventures limited and Sojitz Energy Project Limited to expand foothold in the North Sea RockRose also closed EUR 107 Dyas B V buyout in October 2018 which added more than 5 000 BOE per day of production to the company s portfolio Deal in Sync With Marathon Oil s StrategiesOver the past few years the Texas based energy explorer inked several deals to sell non core assets that do not fit into the company s long term growth plan With the closure of this deal Marathon Oil bided goodbye to 10 countries since 2013 Markedly while the company will derive total oil production from the United States it will retain LNG operations in Equatorial Guinea The strategic sell offs not only bolstered its portfolio but also boosted financials of the firm We believe that Marathon Oil s high emphasis on exiting the non core business and focus on strategic acquisitions and strengthening balance sheet will drive growth However management s low priority toward dividend growth and share buyback programs may dampen investors confidence in the stock The company which intends to optimize its portfolio with high return and low risk investments wants to deepen focus on prolific U S shale plays The upstream player s strategic portfolio in key resource shale plays like Bakken Eagle Ford Permian and STACK SCOOP signals visible production growth in the upcoming years Given enhanced completion designs and effective spacing strategies the firm has been improving the quality of assets and is well positioned to ramp up production and revenues For 2019 Marathon Oil targets 12 output growth in the United States Zacks Rank and Key PicksMarathon Oil currently carries a Zacks Rank 3 Hold Some better ranked oil and gas explorers include Approach Resources Inc NASDAQ AREX and Comstock Resources Inc NYSE CRK each carrying a Zacks Rank 2 Buy You can see This Could Be the Fastest Way to Grow Wealth in 2019 Research indicates one sector is poised to deliver a crop of the best performing stocks you ll find anywhere in the market Breaking news in this space frequently creates quick double and triple digit profit opportunities These companies are changing the world and owning their stocks could transform your portfolio in 2019 and beyond Recent trades from this sector have generated 98 119 and 164 gains in as little as 1 month |
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