The Zacks Analyst Blog Highlights: General Motors Company, Ford Motor, BP Plc, Devon Energy and Anadarko Petroleum

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Nov 10, 2011, 09:30 ET

CHICAGO, Nov. 10, 2011 /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 General Motors Company (NYSE: GM), Ford Motor Co. (NYSE: F), BP Plc (NYSE: BP), Devon Energy Corporation (NYSE: DVN) and Anadarko Petroleum Corporation (NYSE: APC).

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Here are highlights from Wednesday's Analyst Blog:

GM Beats but Profit Dips

General Motors Company (NYSE: GM) posted an 11% decline in profit to $1.74 billion in the third quarter of the year from $1.96 billion in the same quarter of 2011. Nevertheless, on a per share basis, the profit of $1.03 was higher than the Zacks Consensus Estimate of 99 cents. It compared with $1.20 in the third quarter of 2010.

The decline in profit was attributable to lower interest income and other non operating income (net), loss on extinguishment of debt and income tax expense.

Revenues in the quarter escalated 8% to $36.72 billion (including $391 million from GM Financial) on global sales of 2.25 million units versus 2.06 million a year ago, thereby capturing a market share of 12.0%. It exceeded the Zacks Consensus Estimate of $35.66 billion.

Operating income rose to $1.81 billion from $1.73 billion a year ago. Earnings before interest and tax (EBIT) were $2.20 billion compared with $2.28 billion in the third quarter of 2010.

Segment Results

GM North America (GMNA) generated $21.88 billion in revenues, a marginal 2% rise from the year-ago level. EBIT increased slightly to $2.20 billion from $2.13 billion in the third quarter of 2010.

GM Europe (GME) had revenues $6.15 billion in revenues, a 9% increase from the previous year. The segment reported a narrower loss of $292 million compared with $559 million in the prior-year quarter.

GM International Operations (GMIO) generated revenues of $6.29 billion, a 23% growth from the prior year. EBIT dipped to $365 million from $516 million during the third quarter of 2010.

GM South America (GMSA) had revenues of $4.42 billion, an 11% rise from the prior-year quarter. The segment had a loss of $44 million compared with EBIT of $163 million in the third quarter of 2010.

Meanwhile, GM Financial reported an EBIT of $178 million during the quarter.

Financial Position

GM had cash and cash equivalents of $20.30 billion as of September 30, 2011 compared with $21.06 billion at the end of 2010. Total debt decreased to $4.21 billion as of the above date from $4.63 billion as of December 31, 2010. Consequently, debt-to-capitalization ratio decreased to 8.6% from 11.3% in the year-ago period.

In the first nine months of 2011, the company had a cash flow of $6.19 billion from operating activities, down from $8.32 billion in the same period a year ago. Meanwhile, capital expenditures rose to $4.07 billion from $3.11 billion in the 2010-period. This translated into free cash flow of $2.13 billion during the period, significantly down from $5.21 billion in the first nine months of 2010.

Peer Performance

GM's hometown rival Ford Motor Co. (NYSE: F) fared well compared with the company during the quarter under review. Ford posted a 3.5% fall in profit to $1.85 billion in the quarter from $1.91 billion in the same quarter of prior year.

However, on per share basis, earnings were 46 cents versus 48 cents a year ago, beating the Zacks Consensus Estimate of 44 cents. The decline in profit was attributable to fall in commodity prices and anticipated reductions in Financial Services results.

Our Take

GM, a Zacks #3 Rank (Hold) stock, had to seek bankruptcy protection in 2009 due to unfavorable economic conditions and a rapid decline in sales. However, the automaker recouped its sales and earnings by banking on the emerging markets, economic recovery and improved cost structure. The company completed its IPO at the end of 2010, through which it has repaid up to $23.1 billion to the U.S. government.

Based on the current industry outlook, the automaker expects adjusted EBIT in the fourth quarter of the year to be similar with the fourth quarter of 2010 due to seasonal trends in North America and ongoing weakness in Europe. However, the company expects adjusted EBIT for 2011 to show solid improvement over 2010.

BP Finds Gas Off Brazil

BP Plc (NYSE: BP) announced that it has found traces of gas at its Itaipu-2 pre-salt appraisal well in Brazil's deepwater Campos basin. The company has reported to the Brazilian National Petroleum Agency about the potential discovery.

The Itaipu-2 well, located in block BM-C-32 about 130 kilometers off Brazil, was drilled to a total depth of 4877 meters in 1420 meters of water. Itaipu-2 delineates the discovery made in 2009 in Itaipu-1 wildcat, nearly 7 kilometers to the northwest.

BP has encountered elevated gas, gas wetness and fluorescence while drilling the well. However, to validate the find, the company is conducting further logging operations ongoing that will have to be integrated into the overall interpretation. The focus in the next piece of critical appraisal work at Itaipu will be on recovering a high-quality fluid sample and calculating how much the reservoir can produce.

Earlier in 2009, Devon Energy Corporation (NYSE: DVN) held the block when the discovery of Itaipu-1 was announced. BP acquired the interest from Devon Energy and became the operator of Block BM-C-32 with a 40% interest. Anadarko Petroleum Corporation (NYSE: APC) holds a 33.3% interest while the remaining 26.7% is held by Maersk Oil.

Following the oil spill, BP is striving to improve its revenue flow. Thus, exploration success will be the key for the company to deliver strong future growth and re-establish its position. Further, BP remains focused on a string of upstream activities while disposing of much of its lowest return refining business in the U.S. We look forward to a marked recovery, as well as consolidation to reduce operational risk or oil spill-related assignments.

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

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