The Zacks Analyst Blog Highlights: International Paper Co., Hess Corp., Life Technologies Corporation and Massey Energy Company

CHICAGO, Oct. 28 /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: International Paper Co. (IP), Hess Corp. (HES), Life Technologies (LIFE) and Massey Energy Company (MEE).

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Here are highlights from Thursday's Analyst Blog:

International Paper Beats Ests

International Paper Co. (IP) delivered a record adjusted earnings per share (EPS) of 91 cents for the third quarter ended September 30, 2010, comfortably beating the Zacks Consensus Estimate of 78 cents. Reported quarter EPS was more than double that of the year-ago quarter of 37 cents and the preceding quarter of 41 cents.

The outperformance was driven by strong paper and packaging businesses, benefits from announced price increases and restructuring activities, improved operations and favorable business mix.

Reported quarter EPS did not include any special items. The third quarter of fiscal 2009 EPS excluded a benefit of 50 cents and the second quarter fiscal 2010 EPS excluded special items of 21 cents. Including these, International Paper's EPS of 91 cents increased 5% from 87 cents in the year-ago quarter and was more than four times the EPS of 21 cents in the preceding quarter.

Revenues $6.7 billion were ahead of the Zacks Consensus Estimate of $6.5 billion. Revenues jumped 14% year over year and 10% sequentially, driven by strong performance across all of its segments.

Adjusted cost of sales increased 47% year over year to $4.75 billion, and, as a percentage of revenues, it increased to 71% from 55% in the year-ago quarter. Adjusted selling, general and administrative expenses declined 1% year over year to $504 million, and, as a percentage of sales, it contracted 110 basis points to 8%.

Hess Tops Substantially

Hess Corp. (HES) reported better-than-expected third-quarter earnings of $1.31 per share, compared with the Zacks Consensus Estimate of $1.04 and the year-earlier profit of 74 cents. We have adjusted the reported quarter as well as the year-earlier figures for the non-recurring items.

Total revenue increased 21% year over year to $8.95 billion, but remained well below the Zacks Consensus Estimate of $10.33 billion.

Outlook

We continue to see an upstream momentum on the back of the company's large inventory of E&P projects. Hess' improving fundamentals, commodity price leverage and exposure to areas with high resource potential have improved its prospects.

Recently, the company also joined hands with the Chinese oil major, PetroChina Co. (PTR) for E&P in the Daqing oil field, one of the largest crude oil producing area in China. The company is looking forward to apply its Bakken experience to various international destinations. We have a long-term favorable outlook on Hess' E&P portfolio that complements its low-risk drilling opportunities.

Although there is significant resource potential from new discoveries, the E&P business is inherently risky, often with an equal share of successes and failures.

Our Neutral recommendation for the stock remains unchanged at this stage and the company holds a Zacks #3 Rank (short-term Hold rating).

Life Tech Beats, Raises EPS Outlook

Life Technologies Corporation (LIFE) reported an EPS of 56 cents in the third quarter of 2010 compared to 22 cents in the year-ago period. However, after adjusting for certain one-time items, the EPS was 87 cents, surpassing the Zacks Consensus Estimate of 78 cents and 19% higher than 73 cents in the year-ago quarter.

Growth in all the divisions of Life Technologies helped adjusted revenues increase 8% year over year to $869 million, ahead of the Zacks Consensus Estimate of $857 million. Excluding the impact of currency, acquisitions and divestitures, revenues grew 6% and 9% after excluding the previous year's impact of H1N1 and the large Japanese forensic order.

On a geographical basis, barring Japan where revenues declined 1%, revenue growth was witnessed across all other regions: Europe – 5%, Asia-Pacific – 7% and the Americas – 8%.

Although revenues increased 8%, EPS was higher by 19% due to an improvement in operating margin (29% compared to the year-ago quarter's 27.3%), lower interest expense (27.7%), lower adjusted tax rate (25.8% versus 29.1%), partially offset by a 22.4% rise in the share count. While gross margin declined marginally by 20 basis points due to a minor impact from mix, improvement in operating margin was driven by acquisition-related synergies and cost controls.  

Life Technologies exited the quarter with $537 million in the form of cash and short-term investments, 17% lower than $648.1 million at the end of December 2009. We also note that over the same period, long-term debt declined 26.5% to $1,925.7 million from $2,620.1 million at the end of 2009. This led to a decline in interest expense.

Massey Falls Below Estimates, Stock Gains

Coal miner Massey Energy Company (MEE) reported a third quarter adjusted loss of 33 cents per share (excluding Upper Big Branch mine tragedy related charges), falling 19 cents behind the Zacks Consensus Estimate of a loss of 14 cents. The decline in the quarter is primarily attributable to the disruption caused by the Upper Big Branch mine blast.

Operating Results

Net revenues in the reported quarter jumped 26.3% year over year to $810.2 million, mainly due to higher average prices realized on produced coal volumes. However, the company's revenue in the quarter came in below the Zacks Consensus Estimate of $840 million.

Produced tons sold in the quarter totaled 9.9 million compared with 8.7 million in the year-ago quarter. In the quarter, metallurgical and industrial coal shipments represented 18% and 9%, respectively, of total tons sold. Utility coal shipments accounted for 73% of total coal volumes sold in the quarter.

Average produced coal revenue per ton was $71.24 (an aggregate of $703.7 million) in the reported quarter, an increase of nearly 15% from $61.79 per ton (or $535.5 million) reported last year. The improvement was driven by realized price increases for thermal and metallurgical coal tons sold in the quarter.

The increase in thermal coal prices is attributable to the addition of higher priced contracts from the Cumberland acquisition, while metallurgical coal prices improved 30% as a result of stronger market demand and the expiration of lower priced contracts. The operations acquired from Cumberland shipped 1.9 million tons of coal during the quarter at an average price of $80.47 per ton.

Average cash cost per ton for the reported quarter was $62.50 (excluding Upper Big Branch mine tragedy related charges), increasing 25% from the year-ago quarter, mainly on account of lower productivity at the mines, attributed to discrete geological conditions, increased regulatory enforcement actions and related temporary shutdowns, increased labor turnover rates and higher surface mine ratios.

Guidance

Massey Energy expects fiscal 2010 produced coal shipments at 38.5 million tons, with an average realized price of $70.50 per ton. Produced coal shipments for 2011 are forecasted in the range of 43 to 47 million tons with an average realized price range of $81.00 and $86.00 per ton. The company lowered its 2010 and 2011 guidance from 39.0 million tons and 43 to 47 million tons projected earlier.

Average cash cost per ton for 2010 and 2011 is expected to be roughly $60.00 and in the $59.00 - $62.00 range, respectively, excluding charges related to the Upper Big Branch mine tragedy. Other income is guided at $100 - $120 million for 2010 and $20 - $100 million for 2011.

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