The Zacks Analyst Blog Highlights: Chevron, Stone Energy, Seadrill Partners, Linn Energy and Wal-Mart Stores
CHICAGO, Oct. 25, 2013 /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 Chevron Corporation (NYSE:CVX-Free Report), Stone Energy Corp. (NYSE:SGY-Free Report),Seadrill Partners LLC (NYSE:SDLP-Free Report), Linn Energy, LLC (Nasdaq:LINE-Free Report) and Wal-Mart Stores, Inc. (NYSE:WMT-Free Report).
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Here are highlights from Thursday's Analyst Blog:
Chevron Buys Prospect Off Australia Coast
Chevron Asia Pacific Exploration and Production Company, an Australian subsidiary of the U.S. energy behemoth, Chevron Corporation (NYSE:CVX-Free Report), has acquired full operating interest in two blocks located in the deepwater Bight Basin, 275 miles west of Port Lincoln, off the coast of South Australia.
The offshore blocks S12-2 and S12-3 are spread over 8 million acres. The acquisition is expected to add value to the company's portfolio, with more exploration opportunities in Australia. The move is in line with the integrated supermajor's plans of expanding its asset base.
San Ramon, CA-based Chevron is one of the largest publicly traded oil and gas companies in the world. It is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals and other energy-related businesses.
However, Chevron's earnings do not look pretty. Last quarter, the company failed to beat the Zacks Consensus Estimate. We expect this negative trend to continue when the company reports its third quarter earnings on Nov 1.
Earlier this month, the company released a pre-earnings update which supports our view. Per the interim update, Chevron expects third quarter earnings to deteriorate from the previous quarter. In the upstream activities, the update is slightly bullish with oil production expected to be more the previous quarter. On the flip side, the downstream sector outlook is negative as the company expects substantially lower operating results than the last quarter.
Chevron currently holds a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next one to three months.
However, not all stocks in the energy sector have such gloomy outlook. One can consider Stone Energy Corp. (NYSE:SGY-Free Report),Seadrill Partners LLC (NYSE:SDLP-Free Report) and Linn Energy, LLC (Nasdaq:LINE-Free Report) as good investment options. These stocks currently hold a Zacks Rank #1 (Strong Buy) and are expected to significantly outperform the market in the near term.
Wal-Mart Spreading Out in China
Leading retailer, Wal-Mart Stores, Inc. (NYSE:WMT-Free Report), is geared to expand into the fast-growing market of China. It plans to open more than 100 facilities in the country between 2014 and 2016, which will create approximately 19,000 retail jobs.
Wal-Mart further plans to aid the urbanization of the tier-two, tier-three and tier-four cities of China. The company will thus be able to create demand for its goods while serving the customers better. Moreover, Wal-Mart will be able to lower its cost of sales by utilizing the cheap labor of the country.
Wal-Mart plans to focus mainly on its Supercenters and Sam's Clubs, and has undertaken a major remodeling plan that includes revamping about 45 stores in 2013, 55 stores in 2014 and 65 stores in 2016. The retailer also plans to shut down approximately 9% of its stores, which were underperforming recently.
Wal-Mart also plans to invest in distribution networks and upgrade its warehouses in an effort to augment food safety and reduce costs.
China is a strategic market for Wal-Mart as the global chain is facing difficult retail environment in the U.S. Wal-Mart entered China in 1996 with its Supercenter and Sam's Club in Shenzhen. However, it has not been able to gain market share in the country, as it is facing stiff competition from several local players.
Although the low price business model was a big hit in the U.S., the retailer has not been able to set a firm foot in the Chinese market as consumers look for cheaper deals online and in local retail shops. Wal-Mart is facing difficult retail conditions in the country following the recent slowdown of the economy's growth. Moreover, amid several legal issues, the grocery giant also had to part ways with its Indian joint venture partner, Bharti Enterprises.
In such a situation, the investment in China is particularly significant as it may help Wal-Mart capture the world's second largest economy. Walmart had plans to open 100 stores in China by 2015. The retailer will further try to adapt to the changing Chinese landscape by upgrading its merchandise, operations and customer experience.
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