The Zacks Analyst Blog Highlights: Petrobras, ExxonMobil, PetroChina, Royal Dutch Shell plc and VeriFone Holdings
CHICAGO, April 18, 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 Petrobras (NYSE: PBR), ExxonMobil Corp. (NYSE: XOM), PetroChina Co. Ltd. (NYSE: PTR), Royal Dutch Shell plc (NYSE: RDS.A) and VeriFone Holdings (NYSE: PAY).
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Here are highlights from Tuesday's Analyst Blog:
Petrobras Finds More Santos Oil
Barely a few days after announcing the successful drilling of the extension exploratory well in the Iara Evaluation Area of Brazil's Santos Basin, Petroleo Brasileiro S.A. or Petrobras (NYSE: PBR) encountered an offshore reserve of fine quality oil, near the Lula field in the same basin.
Petrobras drilled the well 1-RJS-689A (1-BRSA-925A RJS), commonly known as Dolomita Sul, in Block BM-S-42, 177 km off the coast of Rio de Janeiro State and at 1,747 meters deep waters.
Petrobras, which is the sole owner of the concession, confirmed the discovery via oil sampling at the carbonate levels in the pre-salt layers of the block. The company believes that this find holds a lot of promise and intends to conduct further drilling to estimate the total potential of the reservoirs.
Headquartered in Rio de Janeiro, Petrobras is the largest integrated energy firm in Brazil, dominating the country's energy sector. The company operates in six segments: Exploration and Production, Refining, Transportation and Marketing, Distribution, Gas and Power, Biofuels and International.
We have a very positive medium- to long-term outlook on Petrobras thanks to its encouraging portfolio of investments, particularly in Brazil's pre-salt reservoirs that lie below the Espírito Santo, Campos and Santos basins in deep and ultra-deep water. The company is the operator in most of these exploration areas, and holds interests in them ranging from 20% to 100%.
We also appreciate the company's consistent endeavors to dig new oil reserves across Brazil. Mid last month, Petrobras confirmed the discovery of superior quality crude oil in the Tupi Northeast pre-salt region of the Santos Basin. The company also hit a hydrocarbon accumulation in the pre-salt layer in block BM-C-33, south of Campos Basin, in early March.
However, we expect Petrobras to perform on par with the broader industry and other energy majors such as ExxonMobil Corp. (NYSE: XOM), PetroChina Co. Ltd. (NYSE: PTR) and Royal Dutch Shell plc (NYSE: RDS.A) in the coming quarters. Hence, we maintain a long-term Neutral recommendation on the stock.
VeriFone Downgraded to Neutral
We recently downgraded our recommendation to Neutral from Outperform on VeriFone Holdings (NYSE: PAY).
VeriFone continues to impress backed by strategic acquisitions and a growing high margin services mix in total revenues. This high margin services business is being propelled by new offerings such as London taxi, Secure PumpPay and mobile payments growth.
The recent acquisitions of Hypercom and Point strengthen the company's foothold in Europe along with driving significant synergies.
VeriFone recently completed the acquisition of Point, which provides payment and gateway services and solutions for retailers in Northern Europe. VeriFone intends to extend the Point platform throughout the region and beyond, with the aim of creating the world's largest infrastructure for rapid deployment of alternative payments. With the addition of Point, management expects services revenue will now exceed 30% of total revenue by the second quarter of 2012. Management aims to create a services-based solutions business, with 50% services revenue by the end of fiscal 2015. We believe that this acquisition is a positive for the company, since it expands the product portfolio as well as accelerates the mix of revenues towards higher margin services revenues.
Meanwhile, VeriFone also completed the acquisition of Global Bay Mobile Technologies, a leading provider of next-generation mobile retail solutions.
However, earnings estimates have declined of late even though earnings beat estimates in the first quarter of fiscal 2012. Although VeriFone is growing through acquisitions, organic growth remains a matter of concern. We believe that the integration of Point operations is taking a toll on margins.
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