The Zacks Analyst Blog Highlights: BP, Transocean, Halliburton, Royal Dutch Shell and Tyco International

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May 30, 2014, 09:40 ET

CHICAGO, May 30, 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 BP plc (NYSE:BP-Free Report), Transocean Ltd (NYSE:RIG-Free Report), Halliburton Company (NYSE:HAL-Free Report), Royal Dutch Shell plc (NYSE:RDS.A-Free Report) and Tyco International Ltd. (NYSE:TYC-Free Report).

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

Here are highlights from Thursday's Analyst Blog:

BP's Horizon Spill Review Rejected by Appeals Court

Oil giant BP plc's (NYSE:BP-Free Report) ongoing court case tied to its 2010 Gulf of Mexico (GoM) oil spill suffered a setback on Wednesday. In a 2-1 judgment, the 5th U.S. Circuit Court of Appeals rejected BP's bid to stop payments to businesses that have not proved their damage from the spill. The company has already appealed to the U.S. Supreme Court to review the court order on the settlement. The bone of contention per the company is that the lower court ruling will force it to pay for economic damages to business without the claimants having to prove their losses resulted from the spill.

As a reminder, on Apr 20, 2010, offshore driller Transocean Ltd's (NYSE:RIG-Free Report) ultra-deepwater Horizon drilling platform, contracted to BP, sank following an explosion while operating in the U.S. GoM off the coast of Louisiana. The incident killed 11 workers and spewed more than 200 million gallons of crude in what was 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 Oct 12, 2010.

The breach of Clean Water Act along with other laws led the U.S. government to take legal action against the main defendants in the trial – BP, Transocean and Halliburton Company (NYSE:HAL-Free Report). Several other companies have also been taken to court.

BP estimates the total payment under the spill compensation to exceed $9.2 billion. Under a substantial settlement deal reached last spring, thousands of Gulf Coast businesses and residents hurt by the 2010 BP oil spill in the Gulf of Mexico have started to receive payments.

London-based BP plc is one of the world's largest energy companies, providing its customers with fuel for transportation, energy for heat and light, retail services and petrochemical products. It operates in three segments: Exploration and Production, Refining and Marketing, and Other Businesses and Corporate.

BP – U.K.'s third largest oil company by market value afterRoyal Dutch Shell plc (NYSE:RDS.A-Free Report) – holds a Zacks Rank #3 (Hold).

Tyco Slips to Sell

On May 29, Zacks Investment Research downgraded security and protection services provider Tyco International Ltd. (NYSE:TYC-Free Report) to a Zacks Rank #4 (Sell) from a Zacks Rank #3 (Hold), primarily due to downward estimate revisions.

Despite the downtrend, the company still has the potential to drive the stock up. The stock is currently trading at a forward P/E of 22.0x and long-term earnings growth expectation of 14.3%.

Why the Downgrade?

Tyco recently completed the sale of its South Korean security business for $1.93 billion in cash. The operating units that were divested included Tyco Fire & Security Services Korea Co. Ltd., ADT Caps Co., Ltd., Capstec Co. Ltd. and ADT Security Co. Ltd., which together formed and operated the South Korean security business under the name ADT Korea.

With approximately $600 million of revenues and $125 million operating income estimated for fiscal 2014, ADT Korea was expected to contribute 20 cents per share to Tyco's fiscal earnings. Consequently, Tyco updated its recurring earnings guidance range for the second quarter of fiscal 2014 to 39 cents – 41 cents per share, down from the prior guidance of 44 cents – 46 cents per share to take into account the discontinued operations.

Over the last month, most of the earnings estimates for Tyco were revised downward for the next quarter as well as for fiscal 2015. This seems to be the fallout of lackluster results in the recently reported quarter and an insipid guidance. Given the challenging macroeconomic environment, it appears that management is finding it quite onerous to battle the margin pressures. Tyco's growth is largely dependent on its ability to adapt in both developed and emerging economies by developing or acquiring new technologies that achieve market acceptance with reasonable margins – a challenging situation to grapple with at present.

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

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