The Zacks Analyst Blog Highlights:Baker Hughes, China Petroleum & Chemical, PetroChina, Helmerich & Payne and Seadrill Partners

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Jan 14, 2014, 09:30 ET

CHICAGO, Jan. 14, 2014 /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 the Baker Hughes Inc. (NYSE:BHI-Free Report), China Petroleum & Chemical Corporation (NYSE:SNP-Free Report), PetroChina Co. Ltd. (NYSE:PTR-Free Report), Helmerich & Payne, Inc. (NYSE:HP-Free Report) and Seadrill Partners LLC (NYSE:SDLP-Free Report).

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

Here are highlights from Monday's Analyst Blog:

Iraq Business to Hurt BHI Earnings

Oilfield services provider, Baker Hughes Inc. (NYSE:BHI-Free Report) has provided a preliminary operational update on the fourth quarter of 2013.

The company's Iraqi business suffered operational hindrances and increased expenses in the fourth quarter due to personnel movements, security measures and other nonrecurring items. These contributed to a loss in revenues.

Baker Hughes' pre-tax and after-tax profit is also likely to have been affected by around $80 million, or 18 cents per share due to disturbances in Iraq.

Moreover, weather delays late in the quarter affected activity in the U.S. and the North Sea. As a result, operating profit margins witnessed a sequential decline in North America and Europe/Africa/Russia Caspian.

As a result of the operational items mentioned above, adjusted earnings per share (a non-GAAP financial measure) are expected between 60 cents and 62 cents per share for the quarter. The estimated adjusted earnings per share exclude $29 million in after-tax severance costs, or 6 cents per share, incurred during the quarter.

If the disruption in Iraq is excluded, the estimated adjusted earnings would be 78–80 cents per share. Baker Hughes also repurchased about 6.3 million shares of common stock, totaling $350 billion during the fourth quarter.

Baker Hughes' strong portfolio of products and services should help it post better-than-average results in North America and enable it to expand in the international markets. Baker Hughes, the world's third-largest oilfield services provider, also has a competitive set of technologies, which allows it to bolster its activity in the deepwater Gulf of Mexico. The company appears to be focusing on the international and offshore markets for near-term growth.

Baker Hughes carries a Zacks Rank #3 (Hold).

Sinopec Downgraded to Underperform

We downgraded our recommendation on China Petroleum & Chemical Corporation or Sinopec (NYSE:SNP-Free Report) to Underperform from Neutral on Jan 10, 2014. The company currently retains a Zacks Rank #5 (Strong Sell).

Why Downgraded?

During the first nine months of 2013, the company witnessed a sharp drop in crude oil prices, which dragged down the Exploration and Production (E&P) segment's operating profit by 15.5% year over year. However, increases in the price of international crude oil amid government caps on fuel prices prevented the company from fully passing on the spiraling costs to consumers.

Sinopec's operating income for the Fuels Marketing segment decreased 10.5% year over year. The considerably high volumes were unable to offset lower margins. Owing to its larger downstream refining and petrochemicals operations than its rival PetroChina Co. Ltd. (NYSE:PTR-Free Report), Sinopec remains highly exposed to government directed price controls. This is also expected to affect margins in the future.

We remain apprehensive about the volatile oil and gas fundamentals and a weak macro environment. The company's prospects are closely linked to the successful completion of its growth projects, which in turn, might be adversely affected by operational hindrances as well as overruns and delays in completion. Further, Sinopec's matured domestic oil fields and associated rising costs will continue to be an overhang on its operations as natural declines begin to take a toll.

The other major areas of concern include operational disruption, labor and material cost inflation that could affect project outlays, governmental regulations and severe competition from domestic and international peers. In the E&P space, Sinopec has been lagging other industry players. This is primarily due to exposure to the heavily regulated downstream sector, as well as its relatively weak and capital intensive upstream asset base. In view of these factors, we do not see any catalyst in the near term.

Other Stocks to Consider

Not all stocks indicate poor performance like Sinopec. Zacks Ranked #1 (Strong Buy) stocks – Helmerich & Payne, Inc. (NYSE:HP-Free Report) and Seadrill Partners LLC (NYSE:SDLP-Free Report) – are expected to perform impressively over the short term.

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

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