The Zacks Analyst Blog Highlights: BP plc, Halliburton, Transocean, Pepsico and Coca Cola

Sep 16, 2011, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Sept. 16, 2011 /PRNewswire/ -- 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: BP plc (NYSE: BP), Halliburton Co. (NYSE: HAL), Transocean Ltd (NYSE: RIG), Pepsico Inc. (NYSE: PEP) and Coca Cola Company (NYSE: KO).


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Here are highlights from Thursday's Analyst Blog:

GoM Oil Spill: U.S. Proble Blames BP

Nearly a year and a half after the Deepwater Horizon rig disaster, the federal government issued the final assessment report on Wednesday, which put most of the blame on British energy giant BP plc (NYSE: BP). In addition to the London-based group, the 217-page report issued by a joint Interior Department-Coast Guard panel – the two main agencies responsible for overseeing offshore drilling – also faulted contractor Halliburton Co. (NYSE: HAL) and rig owner Transocean Ltd (NYSE: RIG) for their shortcomings that led to the biggest environmental disaster in U.S. history.    

As a reminder, on April 20, 2010, offshore driller Transocean's ultra-deepwater Horizon drilling platform, contracted to BP, sank following an explosion while operating in the U.S. Gulf of Mexico (GoM) off the coast of Louisiana.

The incident killed 11 workers and spewed more than 200 million gallons of crude in what is touted as the country's worst oil spill ever. Subsequently, a moratorium was imposed on offshore drilling at water depths of more than 500 feet in the region, which was lifted on October 12, 2010.

In the most comprehensive and definitive account of the disaster so far, the report released by the federal investigators concluded that BP – the owner of the Macondo well with a 65% interest – was squarely to blame for the oil spill, as the root causes of the explosion were tied to the company's poor management decisions. BP overlooked crucial warnings associated with the Macondo well, violated federally approved offshore safety regulations, and focused excessively on cost- or time-saving decisions, the finding said.

While assigning the lion's share of the blame to BP and holding it 'ultimately responsible' for conducting operations and ensuring the safety of crew members and the environment, the panel also held Halliburton and Transocean answerable for the catastrophe.

Oilfield services provider Halliburton was blamed for the 'poor cement job' that allowed the oil/gas to burst through the reservoir and reach the rig, causing the explosion, while Transocean – which owned and operated the Deepwater Horizon – was accused of being deficient in avoiding/limiting the disaster, in part by sidestepping alarms and automatic shutdown systems.

The report lays down technological and safety reforms for offshore drillers that are expected to cut the risk of another disastrous blowout and oil spill. It further asks rig operators to provide better reports on their drilling processes to the government and hints at the possibility of renewing surprise checks at Gulf oil rigs, a practice that had been discontinued in recent years.   

Following government's final analysis of the tragedy, we believe investors will now shift their focus on the courts, where a number of litigations between the companies, the public and the government could drag on for years.

BP and Transocean shares currently retain a Zacks #3 Rank, which translates into a short-term 'Hold' rating whereas Halliburton has a Zacks #1 Rank (short-term Strong Buy rating).

Longer-term, we are maintaining our Outperform recommendation on Halliburton, while being Neutral on the other stocks.

PepsiCo Gets Philanthropic

Pepsico Inc. (NYSE: PEP), the world leading retailer of soft drinks and snacks has decided to offer help to the nation's premier center of Mexican-American culture, LA Plaza de Cultura y Artes in Los Angeles. The company wants to boost their praiseworthy work of educating people about the history and contributions of Mexican Americans to the nation.

The retail giant is donating $1 million to the organization. The three-year grant will go toward the establishment of an Edible Teaching Garden and Culinary Arts Program for Hispanic youth of the community.

Both the programs have been designed for children aged between 5 and 20, as well as educate regional teachers through curriculum-based workshops, group tours, online resources.

In South California, LA Plaza focuses on improving the quality of life of children. To fulfill this goal the organization tries creating better awareness of nutrition for them, holds sports events and physical activity classes and provides knowledge on Mexican and Mexican-American cuisine.

The new initiative by Pepsi comes as a part of its mission to deliver 'Performance with Purpose'. PepsiCo has promised to create a healthier tomorrow for its customers by redefining its business and introducing a portfolio filled with quality products, enabling consumers to make informed choices. As a part of the initiative Pepsi aims at introducing more nutritious food and reduce fat content in both drinks and snacks.

It is increasing the whole grains, fruits and vegetables, nuts, seeds and low-fat dairy in its product portfolio, and reducing the average sodium per serving in key global food brands in key markets by 25% by 2015. However, its tough competitor Coca Cola Company (NYSE: KO) is also moving in the same direction and has been providing calorie labels on its bottles to make customers aware of the calorie intake in each serving of its drinks.

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