The Zacks Analyst Blog Highlights: Petroleo Brasileiro, Royal Dutch Shell, W&T Offshore, Dril-Quip and Luxfer Holdings

Aug 20, 2013, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Aug. 20, 2013 /PRNewswire/ -- 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 Petroleo Brasileiro SA (NYSE: PBR-Free Report), Royal Dutch Shell plc (NYSE: RDS.A-Free Report), W&T Offshore Inc. (NYSE: WTI-Free Report), Dril-Quip Inc. (NYSE: DRQ-Free Report) and Luxfer Holdings PLC (NYSE: LXFR-Free Report).


Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Monday's Analyst Blog:

Petrobras to Shed $2.1B in Assets

The board of directors of the Brazilian energy behemoth, Petroleo Brasileiro SA or Petrobras S.A. (NYSE: PBR-Free Report), has sanctioned the sale of its $2.1 billion petrochemical, oil properties. Moreover, the company is planning to wrap up its property sale by the second half of this year, in order to support its $9.9 billion asset divestment program.

As per the authorization, Petrobras will hand over its entire ownership (35%) in block BC-10 to Sinochem Group – a conglomerate in China – for a total consideration of roughly $1.54 billion. Europe's largest oil company, Royal Dutch Shell plc (NYSE: RDS.A-Free Report) and India's state-owned company, Oil & Natural Gas Corp. ("ONGC"), hold 50% and 15% stakes in the block, respectively.  

Included in the sanction, Petrobras will divest all of its interests in Petroquimica Innova, for a consideration of $372 million to Videolar SA. Innova is a petrochemical firm that engages in the manufacture of styrene, ethylbenzene and polystyrene, which are utilized to produce household appliances and other products.

Moreover, as part of the permission given by the board, Petrobras will sell its 33%, 100% and 60% ownerships in MC 613, GB 244 and EW910 blocks, respectively, for about $185 million. All the blocks are based in the U.S. Gulf of Mexico.

The remaining stakes in the EW910 property is owned by W&T Offshore Inc. (NYSE: WTI-Free Report), an independent energy firm. Moreover, the remaining 67% interest in the MC 613 asset is held by Royal Dutch Shell. The buyers of the properties have not been declared yet.

Management declared that the sales are subject to the approval of the regulators.

Headquartered in Rio de Janeiro, Petrobras' activities include: exploration, exploitation and production of oil from reservoir wells, shale and other rocks, and refining, processing, trade and transport of oil and oil products, natural gas and other fluid hydrocarbons, in addition to other energy-related activities.

The Brazilian government, the company's majority shareholder, has a history of political interference in Petrobras' affairs. We do not expect this situation to change in the short- to medium-term. This may impact the company's performance, since the interest of the government might not coincide with that of the minority shareholders.

Petrobras currently retains a Zacks Rank #5 (Strong Sell), implying that it is expected to significantly underperform the broader U.S. equity market over the next 1 to 3 months.

Meanwhile one can look at energy firm Dril-Quip Inc. (NYSE: DRQ-Free Report) that offers value. The stock currently sports a Zacks Rank #1 (Strong Buy).

Luxfer Holdings Falls to Strong Sell

Zacks Investment Research downgraded Luxfer Holdings PLC (NYSE: LXFR-Free Report) to a Zacks Rank #5 (Strong sell) on Aug 16, 2013.

Why the Downgrade?

Shares of Luxfer Holdings have dropped 0.5% since the company reported its second quarter of 2013 results on Aug 12. Adjusted net income plummeted 8.3% year over year to $10.0 million. Diluted earnings per ADS came in at 36 cents, behind the Zacks Consensus Estimate of 40 cents.

Revenue for Luxfer Holdings decreased 2.1% year over year due primarily to weak results from the Elektron Division and $1.0 million negative impact from foreign currency translation. Gas Cylinders Division's revenue grew 13.7% year over year while Elektron Division posted 15.3% year-over-year decline.

Talking of expenses and margins, cost of sales in the quarter represented 75.2% of total revenue, a slight increase from 74.9% reported in the year-ago quarter. Operating margin in the quarter was 12.3%, down 190 basis points, year over year.

For fiscal 2013, management of Luxfer Holdings anticipates trading profit to be $60.5 million-$63.5 million in 2013, down $5.0 million-$8.0 million from 2012 results. Weak results are anticipated from European automotive and the U.S. defense markets in the quarters to come.

In the last 7 days, the Zacks Consensus Estimate for Luxfer Holdings has gone down by 10.1% to $1.51 for 2013 and has declined 9.2% to $1.78 for 2014. Also, we have an Earnings ESP (Read: Zacks Earnings ESP: A Better Method) of -6.6% and -2.8% for 2013 and 2014, respectively.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.


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