The Zacks Analyst Blog Highlights: Bank of America, JPMorgan Chase, Wells Fargo, Chevron and Exxon Mobil

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Jul 13, 2012, 09:30 ET

CHICAGO, July 13, 2012 /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 Bank of America Corporation (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Company (NYSE:WFC), Chevron Corp. (NYSE:CVX) and Exxon Mobil Corp. (NYSE:XOM).

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Here are highlights from Thursday's Analyst Blog:

Lawsuit Against BofA to Continue

On Wednesday, Reuters reported that U.S. District judge William Pauley in Manhattan refrained to cancel the legal charges made by shareholders, led by a Pennsylvania school pension fund, against Bank of America Corporation (NYSE:BAC), accusing it of misleading them. For this, the shareholders are seeking billions of dollars in compensation.

However, the judge has dismissed several claims pertaining to the executives and directors, including the CEO of BofA and many underwriters.

The shareholders had alleged that BofA misinformed them about the risks involved in perilous mortgage loans and its reliance on the faulty Mortgage Electronic Registration System Inc. (MERS). Due to this, the shareholders encountered huge losses. According to the judge, the investigation concluded that BofA was indeed involved in such fraudulent practices, and therefore he permitted the shareholders to proceed with the lawsuit.

The officials at BofA have claimed that the disclosure regarding the usage of MERS was properly made. However, the circumstances suggest a different story.

Background

During 2009-2010, the new issuance of shares by BofA included shares issued to repay the dues related to Troubled Asset Relief Program (TARP). To induce investors to invest in these shares, BofA deliberately did not divulge any information relating to the weakness of mortgage buyback claims, flawed internal controls and compliances to various rules. Moreover, the bank's dependence on MERS was not disclosed.

MERS, which provides database for mortgage servicers, has been accused by the shareholders of sloppy record keeping. Its performance was so disgraceful that it failed to furnish data for legal foreclosures of several delinquent mortgage loans.

Therefore, the shareholders filed the lawsuit against BofA in the U.S. District Court of New York.

Earlier this year, along with BofA, the New York Attorney General also dragged JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Company (NYSE:WFC) into the court over fraudulent record keeping of mortgage loans through MERS. The banks had tried to get these lawsuits dropped, but failed.

Conclusion

Shares of BofA currently retain a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we also maintain a long-term Neutral recommendation on the stock.

Chevron Sees Upbeat 2Q

U.S. energy supermajor Chevron Corp. (NYSE:CVX) released its second quarter 2012 interim update, covering the first 2 months of the quarter. On the whole, the update is bullish, with earnings expected to be higher than the previous quarter.

The company, however, expects results for the Exploration and Production arm to move down sequentially due to a drop in crude oil prices, partially compensated by favorable foreign exchange items.

The San Ramon, California-based integrated firm added that second quarter refining and marketing results would also fare better than the first quarter of 2012, benefiting from wider profit margins and gains from the sale of assets.

Additionally, Chevron expects net after-tax charges associated with corporate and other activities between $300 million and $400 million.

Segmental Analysis

Upstream:

Chevron reported that oil and natural gas production averaged 2.615 million oil-equivalent barrels per day, 2.9% below the second quarter 2011 level, due to reduced volumes both in the U.S. and overseas. Production would also be down by about a percent from the first quarter.

In the first two months of the June quarter, Chevron's total domestic oil equivalent production improved 14,000 barrels per day from the previous-quarter levels, primarily attributable to strong contribution from the Gulf of Mexico operations. On the other hand, net international oil equivalent production decreased 30,000 barrels per day from in the first quarter.

U.S. crude price realizations during April-May 2012 averaged $108.80 per barrel, up marginally from $108.37 in the first quarter, while international realizations for liquids dipped by $5.56 to $104.47 per barrel. Chevron's domestic realized natural gas prices for this period averaged $2.05 per thousand cubic feet (Mcf), compared with $2.48 in the preceding quarter. Average international natural gas realizations were up 35 cents per Mcf to $6.23.

Downstream: Regarding downstream operations, the second-largest U.S. oil company by market value after Exxon Mobil Corp. (NYSE:XOM) said that its U.S. refinery crude-input remained almost unchanged from the first quarter. Refinery crude-input volumes outside the U.S. climbed 74,000 barrels per day during the period, aided by the completion of planned maintenance activities at various refineries.

Second quarter refining margins increased $1.68 per barrel sequentially on the U.S. West Coast and substantially by $4.33 per barrel on the Gulf Coast.

Second Quarter Estimate

Chevron plans to release its quarterly results on Friday, July 27, 2012, before the start of trading. The Zacks Consensus Estimate for Chevron's second quarter is $3.23 per share, lower than the earnings of $3.89 in the year-ago period and $3.39 in the previous quarter (both excluding adjustments for foreign-currency effects).

Chevron is currently a Zacks #3 Rank (Hold) stock, implying that it is expected to perform in line with the broader U.S. equity market.

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