The Zacks Analyst Blog Highlights: ManpowerGroup, Baker Hughes, Transocean, Diamond Offshore Drilling and Ensco

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Apr 17, 2013, 09:30 ET

CHICAGO, April 17, 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 ManpowerGroup Inc. (NYSE:MAN), Baker Hughes Inc. (NYSE:BHI), Transocean Ltd. (NYSE:RIG), Diamond Offshore Drilling Inc. (NYSE:DO) and Ensco plc (NYSE:ESV).

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Here are highlights from Tuesday's Analyst Blog:

What's In Store for Manpower Earnings?

ManpowerGroup Inc. (NYSE:MAN) is slated to report its first-quarter 2013 results before the market opens on Apr 19. In the last quarter, it posted a positive surprise of 18.2%. Let's see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Manpower, the global leader in the employment services industry, posted stronger-than- anticipated fourth-quarter 2012 results on the back of effective cost management and better gross margin. The company is contemplating on exiting lower margin business and venturing into high margin business. On the other hand, the ManpowerGroup Solutions business sustained its growth momentum. The demand for the counter-cyclical outplacement services also portrayed signs of steadiness, which increased 16% during the quarter. Canada, U.K., China and India, all contributed to the company's growth story.

Earnings Whispers?

Our proven model does not conclusively show that Manpower is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, #2 or #3 for this to happen. This is not the case here as you will see below.

Zacks ESP: ESP for Manpower is -2.27%. This is because the Most Accurate Estimate stands at 43 cents, while the Zacks Consensus Estimate is pegged at 44 cents.

Zacks Rank #2 (Buy): Manpower's Zacks Rank #2 (Buy) lowers the predictive power of ESP because the Zacks Rank #2 when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

U.S. Rig Count Jumps by 33

In its weekly release, Houston-based oilfield services company Baker Hughes Inc. (NYSE:BHI) reported a rise in the U.S. rig count (number of rigs searching for oil and gas in the country). This upside can be mainly attributed to an increase in the tally of oil-directed rigs.

The Baker Hughes' data, issued since 1944, acts as an important yardstick for drilling contractors like

Transocean Ltd.

(NYSE:

RIG

Diamond Offshore Drilling Inc.

(NYSE:

Ensco plc

(NYSE:

ESV

), etc. in gauging the overall business environment of the oil and gas industry.

Analysis of the Data

Weekly Summary:

Rigs engaged in exploration and production in the U.S. totaled 1,771 for the week ended Apr 12, 2013. This was up by 33 from the previous week's rig count and indicates the second increase in 3 weeks.

The current nationwide rig count is more than double the lowest level reached in recent years (876 in the week ended Jun 12, 2009), though it is way below the prior-year level of 1,950. It rose to a 22-year high in 2008, peaking at 2,031 in the weeks ending Aug 29 and Sep 12.

Rigs engaged in land operations ascended by 32 to 1,697, offshore drilling was up by 1 to 49 rigs, while inland waters activity remained steady at 25 units.

Natural Gas Rig Count: The natural gas rig count – which recently slumped to its lowest point since May 1999 – increased for the first time in 4 weeks to 377 (a gain of 2 rigs from the previous week). Despite the weekly improvement, the number of gas-directed rigs is down by 54% from its 2012 peak of 811. In fact, the current natural gas rig count remains 77% below its all-time high of 1,606 reached in late summer 2008. In the year-ago period, there were 624 active natural gas rigs.

Oil Rig Count:

The oil rig count – that rocketed to a 25-year high of 1,432 in August last year – jumped by 30 to 1,387. The current tally is well above the previous year's rig count of 1,322. It has recovered strongly from a low of 179 in June 2009, rising 7.7 times.

Miscellaneous Rig Count: The miscellaneous rig count (primarily drilling for geothermal energy) at 7 was up by 1 from the previous week.

Rig Count by Type:

The number of vertical drilling rigs rose by 12 to 463, while the horizontal/directional rig count (encompassing new drilling technology that has the ability to drill and extract gas from dense rock formations, also known as shale formations) was up by 21 to 1,308. In particular, horizontal rig units – that reached an all-time high of 1,193 in May 2012 – rose by 18 from the last week's level to 1,102.

Zacks Rank: As of now, Transocean, Diamond Offshore and Ensco are all Zacks Rank #3 (Hold) stocks, implying that these are expected to perform in line with the broader U.S. equity market over the next one to three months.

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