The Zacks Analyst Blog Highlights:Chevron, Exxon Mobil, YPF, OMV Aktiengesellschaft and Lockheed Martin

Jan 13, 2014, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Jan. 13, 2014 /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 the Chevron Corporation (NYSE: CVX-Free Report), Exxon Mobil Corp. (NYSE: XOM-Free Report), YPF SA (NYSE: YPF-Free Report), OMV Aktiengesellschaft (OTC:OMVJF-Free Report) and Lockheed Martin Corp. (NYSE: LMT-Free Report).


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

Here are highlights from Friday's Analyst Blog:

Chevron Reports Pre-Earnings Update

U.S. energy behemoth Chevron Corporation (NYSE: CVX-Free Report) released its fourth-quarter 2013 interim update covering the first two months of the quarter. Chevron expects its fourth-quarter earnings to be similar to the previous quarter's profit.

In the upstream activities, the update is bearish as Chevron projects lower sequential earnings from the segment. Decreased domestic and international oil equivalent production during the first two months of the December quarter as compared to third-quarter 2013, has justified the company's expectation. Both domestic and international liquid price realization during Oct-Nov 2013 has decreased from the previous quarter.

However, in the downstream sector, the outlook is positive with refining margin projected to increase in the U.S. West Coast.

Segmental Analysis

Upstream: The company's oil and natural gas production averaged 2.564 million oil-equivalent barrels per day, down 3.9% from the fourth-quarter 2012 level. The decrease was due to the fall in both domestic and international production. Production also witnessed a nominal sequential decrease of 0.8%.

In the first two months of the December quarter, Chevron's total domestic production was 650,000 barrels of oil equivalent per day (BOE/D) as compared to 655,000 BOE/D in the previous quarter. The decrease was owing to planned shutdown activities in the Gulf of Mexico.

et international oil equivalent production – at 1,914,000 BOE/D – was 16,000 barrels per day less than the third quarter of 2013. Australia's maintenance work and shutdown activities at Angola's liquefied natural gas (LNG) facility affected the result.

The U.S. crude price realizations during Oct-Nov 2013 averaged $90.17 per barrel, down from $97.18 in third-quarter 2013, while international realizations decreased by $4.74 to $99.55 per barrel. Chevron's domestic realized natural gas prices for this period averaged $3.28 per thousand cubic feet (Mcf) compared with $3.23 in the third quarter of 2013. However, average international natural gas realizations were down 20 cents per Mcf to $5.68.

Downstream: Regarding downstream operations, the second-largest U.S. oil company by market value after Exxon Mobil Corp. (NYSE: XOM-Free Report), said that its domestic refinery crude input rose 27,000 barrels per day from the previous quarter. The restart of the El Segundo, California-based refinery aided the result.

Refinery crude input volumes outside the U.S. were, however, down (by 9,000 barrels per day) during the same period.

The fourth-quarter refining margins increased by $1.46 per barrel sequentially in the U.S. West Coast. However, it decreased by 67 cents per barrel in the Gulf Coast.  

Fourth Quarter Estimate

Chevron plans to release its quarterly results on Jan 31, 2014, before the opening bell. The Zacks Consensus Estimate for Chevron's fourth-quarter is $2.88 per share.

Zacks Rating

Chevron currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at better-ranked players in the oil and gas integrated industry like YPF SA (NYSE: YPF-Free Report) and OMV Aktiengesellschaft (OTC:OMVJF-Free Report). YPF sports a Zacks Rank #1 (Strong Buy) while OMV holds a Zacks Rank #2 (Buy).

Strong Buy on Lockheed Martin

On Jan 10, 2014, Zacks Investment Research upgraded the largest U.S. defense operator Lockheed Martin Corp. (NYSE: LMT-Free Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Lockheed Martin has been witnessing rising earnings estimates for 2014 on the back of continuous order flows from the Pentagon's funding list. In the recent past, the company has received a series of contracts from the U.S. Department of Defense (DoD), ranging from big to small tickets. These defense deals are a testimony to the wide range of products at the disposal of Lockheed Martin.

Recently, Lockheed Martin received two production contracts from the U.S. Air Force, valued at $449 million in total. The contracts call for the company to continue production of its Joint Air-to-Surface Standoff Missile, and the extended range variant. The two contracts include production of 340 baseline missiles and 100 ER missiles.

Apart from the big wins, the company received small contracts, which kept the order book ticking amidst harsh budget austerities. Again, the company seems confident of selling F-35 fighter jets to foreign clients, which would to some extent compensate for lower defense spending at home. Most of the company's top line is expected to come from foreign governments over the next five years.

This well-known defense behemoth delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 14.00%. Along with earnings growth, Lockheed Martin has boosted its dividend rate. From a quarterly payout of 11 cents a share in 2002, it has increased to $1.33. Its annual dividend is now $5.32, which has a 3.6% yield.

The solid performance of the company in 2013 is also reflected in its traded price. Lockheed's share price closed at $148.66 on Dec 31, 2013, reflecting a gain of 64.8% over the last twelve-month period.

We believe these strong fundamentals have led to the rank upgrade.

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

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