The Zacks Analyst Blog Highlights: Baker Hughes, Halliburton,Schlumberger, Emerge Energy Services and Walgreen

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Oct 07, 2014, 09:30 ET

CHICAGO, Oct. 7, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Baker Hughes Inc. (NYSE:BHI-Free Report), Halliburton Co. (NYSE:HAL-Free Report), Schlumberger Ltd. (NYSE:SLB-Free Report), Emerge Energy Services L.P. (NYSE:EMES-Free Report) and Walgreen Co. (NYSE:WAG-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Monday's Analyst Blog:

New Rig Count Down on Nat Gas Pullback

In its weekly release, Houston-based oilfield services company Baker Hughes Inc. (NYSE:BHI-Free Report) reported a fall in U.S. rig count (number of rigs searching for oil and gas in the country), owing mainly to a fall in the number of natural gas rigs.

The Baker Hughes data, issued since 1944, acts as an important yardstick for energy service providers in gauging the overall business environment of the oil and gas industry.

Analysis of the Data

Weekly Summary: Rigs engaged in exploration and production in the U.S. totaled 1,922 for the week ended Oct 3, down by 9 from the previous week.

The current nationwide rig count is more than double the lowest level reached in recent years (876 in the week ended Jun 12, 2009) and is well above the prior-year level of 1,756. It rose to a 22-year high in 2008, peaking at 2,031 in the weeks ending Aug 29 and Sep 12.

Rigs engaged in land operations decreased by 8 to 1,850, offshore drilling was down by 1 to 61 rigs, while inland waters activity remained flat at 11 units.

Natural Gas Rig Count: After a slump in mid-June to its lowest point since May 1993, the natural gas rig count decreased to 330 (a fall of 8 rigs from the previous week). As per the most recent report, the number of natural gas-directed rigs is down 58% from its recent peak of 811, reached in 2012.

In fact, the current natural gas rig count remains 80% below its all-time high of 1,606 reached in late summer 2008. In the year-ago period, there were 378 active natural gas rigs.

Oil Rig Count: The count was down by 1 to 1,591. The current tally is way above the previous year's rig count of 1,372. It has recovered strongly from a low of 179 in Jun 2009, rising almost 9 times.

Miscellaneous Rig Count: The miscellaneous rig count (primarily drilling for geothermal energy) at 1 remained unchanged from the previous week.

Rig Count by Type: The number of vertical drilling rigs fell by 1 to 372, while the horizontal/directional rig count (encompassing new drilling technology that has the ability to drill and extract gas from dense rock formations, also known as shale formations) was down by 8 to 1,550. In particular, horizontal rig units decreased by 6 from last week's level to 1,341.

Gulf of Mexico (GoM): The GoM rig count remained flat at 59.

Conclusion

A Key Barometer of Drilling Activity: An increase or decrease in the Baker Hughes rotary rig count heavily weighs on the demand for energy services – drilling, completion, production etc. – provided by companies that include large-cap names like Halliburton Co. (NYSE:HAL-Free Report) and Schlumberger Ltd. (NYSE:SLB-Free Report).

However, our preferred pick in this group is Emerge Energy Services L.P. (NYSE:EMES-Free Report). The Southlake, TX-based firm – carrying a Zacks Rank #2 (Buy) – has a solid secular growth story with the potential to rise from the current level.

Walgreens' September Sales Numbers Impress

Drug retailer Walgreen Co. (NYSE:WAG-Free Report) recently reported results for the month of Sep 2014. The company posted 9.4% year-over-year sales growth to reach $6.48 billion in the month.

Total front-end sales increased 2.2% from the year-ago period, while comparable store front-end sales improved 1.7%. Customer traffic in comparable stores decreased 2.7% whereas basket size increased 4.4% year over year.

Prescriptions filled at comparable stores at Walgreens increased 6.6% (or up 3.9% on a calendar day-shift adjusted basis). According to Walgreens, this month had one additional Tuesday and one lesser Sunday than the comparable prior-year month, which positively impacted prescriptions filled at comparable stores by 2.7%.

Total sales in comparable stores rose 7.9% on a year-over-year basis. The calendar day shifts positively impacted comparable store sales by 1.8% while the generic wave in the pharmaceutical industry during the last 12 months led to an adverse impact of 1.3% on comparable store sales.

Walgreens' total pharmacy sales, which accounted for the lion's share (67.8%) of total sales in the reported month, improved 14.2% year over year. Comparable store pharmacy sales increased 11.3% (up 8.6% on a calendar day-shift adjusted basis). Calendar day shifts had a positive effect of 2.7% on pharmacy sales in comparable stores. On a calendar day-shift adjusted basis, the generic wave in the pharmaceutical industry dragged comparable store pharmacy sales by 1.9% in September. Season-to-date flu shots administered at pharmacies and clinics were more than 2.1 million, up 11.5% year over year.

The company opened 9 stores (including 4 relocations) and closed down 4 stores during the reported month.

As of Sep 30, 2014, Walgreens operates 8,308 locations in 50 U.S. states, the District of Columbia, Puerto Rico, Guam and the U.S. Virgin Islands, including 8,207 drugstores (84 more than the year-ago period). The company also operates infusion and respiratory service facilities, specialty pharmacies and mail service facilities.

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