The Zacks Analyst Blog Highlights: Chesapeake Energy, Apache, Anadarko Petroleum, EOG Resources and Northrop Grumman

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May 22, 2012, 09:30 ET

CHICAGO, May 22, 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 Chesapeake Energy Corporation (NYSE:CHK), Apache Corp. (NYSE:APA), Anadarko Petroleum Corp. (NYSE:APC), EOG Resources (NYSE:EOG) and Northrop Grumman Corporation (NYSE:NOC).

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Here are highlights from Monday's Analyst Blog:

Pay Cut for Chesapeake Directors

Chesapeake Energy Corporation (NYSE:CHK) has initiated a new compensation policy for outside directors in response to the growing concern among its shareholders to improve its corporate governance. Another factor contributing to this was Chesapeake's chief executive Aubrey McClendon's undisclosed loans in excess of $1 billion against his interests in company wells.

Under the new arrangement, an outside director's compensation has been trimmed by about 20%. It also puts an end to the usage of partly owned aircraft for personal travel by the outside directors.

Chesapeake's new plan allows the outside directors to receive a total compensation of $350,000 per year. Of the total, $100,000 will be in cash and $250,000 in equity.

Per the recently filed proxy statement by Chesapeake, the company is appraising its compensation for 2012 and beyond. The new reimbursement arrangement made in consultation with an independent compensation advisor incorporates a number of alterations.

The changes consist of compensation cutback for the chief executive officer for 2011 and coordination of the entire executive management team's compensation with the company's performance for 2012 and beyond. Also included in the alterations is the retention of an independent compensation advisor for the board's Compensation Committee.

Per the Bloomberg estimates, Chesapeake's new compensation – even after the 20% cut – awards its directors 34% over the average $260,752 in compensation received by board members at 15 other upstream companies on the Standard & Poor's 500 Index in 2011. Only three companies- Apache Corp. (NYSE:APA), Anadarko Petroleum Corp. (NYSE:APC) and EOG Resources (NYSE:EOG) paid more to their board members in 2011.

Chesapeake holds a Zacks #3 Rank, which translates to a Hold rating for a period of one to three months. For the long term, we maintain a Neutral recommendation on the stock.

Northrop Gets NATO Contract

Northrop Grumman Corporation (NYSE:NOC) has signed a $1.7 billion or 1.2 billion euro contract for NATO's Alliance Ground Surveillance system or AGS. Northrop Grumman will be the prime contractor for the NATO AGS program and build the Global Hawk air vehicle, supporting systems and payloads. The contract also includes the purchase as well as initial operation and maintenance of five Global Hawk unmanned aircraft and transportable ground stations.

Operating under NATO command, the AGS is expected to be the major data source for NATO's system for Joint Intelligence, Surveillance and Reconnaissance or JISR. The main operating base of NATO AGS will be located at Sigonella, Italy.

Los Angeles-based Northrop Grumman Corporation is one of the largest defense contractors in the U.S. The company supplies a broad array of products and services to the U.S. Department of Defense (DoD), including electronic systems, information technology, aircraft, space technology and systems integration services. The positive case for Northrop Grumman stems from revenue growth across the board and a broad diversification of programs.

Northrop Grumman offers a strong program portfolio positioned to take advantage of focus areas in the defense space, an improving balance sheet and an ongoing share repurchase program. Also, its product line in high priority categories, such as defense electronics, unmanned aircraft and missile defense, gives Northrop Grumman an edge over competition.

The company's backlog is expected to see further upside in the near future through unmanned aerial vehicle (UAV) platforms, including Broad Area Maritime Surveillance (BAMS), Fire Scout and Navy Unmanned Combat Air System (UCA). Thus, the quantitative Zacks # 2 Rank (short-term Buy rating) for the company indicates downward directional pressure on the shares over the near term.

However, these are offset by apprehension regarding defense cutbacks on high-cost platform programs, over-exposure to the DoD budget, lower backlog, cost over-runs and reductions in Afghanistan and Iraq operations.

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