The Zacks Analyst Blog Highlights: IBM, Eaton, Caterpillar, BP Plc and ExxonMobil

CHICAGO, April 19, 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 IBM (NYSE: IBM), Eaton (NYSE: ETN), Caterpillar (NYSE: CAT), BP Plc (NYSE: BP) and ExxonMobil Corporation (NYSE: XOM).

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Here are highlights from Wednesday's Analyst Blog:

Spring Pullback Over? Not So Fast

Tuesday's surge certainly entertains the idea that the pullback is indeed over. The trend of economic fundamentals support the bullishness, with strong data in manufacturing, jobs, housing, banking, and consumer spending and confidence.

And the earnings report cards so far have been encouraging, confirming some degree of first quarter strength in stock prices. But we've heard from barely 100 companies in the S&P 500, so the corporate profits jury is still out, especially as earnings may have grown only 1%, or less, in the first quarter.

It's quite possible that the market has gotten ahead of earnings that will get more momentum in the second half. We have yet to hear from enough multinational companies about the impacts they see on their businesses this year from Europe and China. In this regard, I look forward to reports and guidance from IBM (NYSE: IBM), Eaton (NYSE: ETN), and Caterpillar (NYSE: CAT).

So while the market has been easily able to shake off Euro-debt worries that resurfaced when Spain's borrowing costs topped 6% again, and China's slow-down looks smooth and soft, I don't think the pullback is over for two reasons:

1) Institutional investors want to see earnings and hear guidance from more companies over the next 2 weeks before they can confirm that a real profits slow-down isn't about to unfold as S&P 500 full year estimates have slipped from $110 to below $103 in the past six months. Many are also busy revising their GDP forecasts upwards above 2.5%, and they await April 27 for the first look at 1Q growth to see if they got it right.

2) Technical price damage to indexes and sectors needs to be worked through so that the weak hands are flushed out and the strong bulls can put a stake in the ground at new value levels for the next leg higher. This sideways consolidation trade is actually very good for the long-term health of this bull market.

How Healthy and Strong is the Bull?

Some strategists think the recovery is fueled primarily by the Fed's easy money policy and that the leveling off in the earnings picture means we are due for a much more severe correction. I disagree. The economy has gained its own footing and is still poised for upside surprises. The menace of deflation must be soundly beaten before you can worry about inflation in a mature and complex economy like the US.

We've come a long way in this economic recovery and bull market. And it's not over. But just as markets rush to price in extremes to the downside, they also do so up top, especially as investors get left behind. So this consolidation phase after a 30% run off the last bottom is very healthy indeed for the bull's strength.

The bull is well alive indeed. So be ready to buy the next steep pullback when it comes. Plan to scale into it at the levels I've talked about. And if it doesn't come and we overtake S&P 1,400 again before May, then look to buy inevitable tests back to 1,375-90.

If the global economy can handle the debt crises and deleveraging of the past five years, which incidentally have not derailed the emerging markets bulls, we should see S&P 1,500 this year.

BP Advances European Gas Pipeline Plans

U.K.-based oil major BP Plc (NYSE: BP) reported that the Shah Deniz consortium has agreed to proceed with the Front End Engineering and Design (FEED) on the Shah Deniz Stage 2 project valued at $25 billion.

Located about 70 kilometers offshore in the Caspian, the Shah Deniz Stage 2 project will offer new opportunities along the Southern Gas Corridor by carrying gas originating from the Caspian Seato markets in Turkey and Europe. The success of this project would help the Shah Deniz consortium to achieve its goal to begin gas exports around the end of 2017.

The adoption of FEED will facilitate advanced engineering studies, drilling operations on new wells and new commercial contracts, as well as initiation of important construction contracts.

The Shah Deniz consortium will decide on the export routes across Turkey and into Europe, in the FEED phase of the project. The final decision is likely to be made in 2013.

The consortium is pondering three alternatives to make gas available in Europe. Firstly, via the Trans Adriatic Pipeline (TAP) with a route to Italy. Secondly, using Nabucco West, which would carry gas from the Turkish-European border across Eastern Europe to the West. Lastly, through the South East Europe Pipeline (SEEP) carrying gas through Hungary, Bulgaria and Romania.

BP operates Shah Deniz Stage 2 project, estimated to hold more than 30 trillion cubic feet of gas resources. Shah Deniz Stage 2 is likely to boost annual gas output by 16 billion cubic meters from the current output of 9 billion cubic meters per annum from Shah Deniz Stage 1.

The field is considered to be one of the largest oil and gas developments worldwide. It has over 26 wells, two new platforms, a terminal expansion and about 4,000 kilometers of new pipelines to Europe. The terminal expansion includes the extension of the Sangachal Terminal.

There is also a scheduled upgrade of 16 billion cubic meters per annum for the South Caucasus Pipeline. Further additions would be made to the pipeline system to carry gas from Shah Deniz across Turkey and Europe.

BP holds a Zacks #2 Rank, which is equivalent to a Buy rating for a period of one to three months. Longer term, we maintain our Neutral recommendation on the stock. BP faces tough competition from ExxonMobil Corporation (NYSE: XOM).

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