The Zacks Analyst Blog Highlights:Liberty Media, SIRIUS XM Radio, Charter Communications, Time Warner Cable and Baker Hughes

Jan 07, 2014, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Jan. 7, 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 Liberty Media Corp. (Nasdaq:LMCA-Free Report), SIRIUS XM Radio Inc. (Nasdaq:SIRI-Free Report), Charter Communications Inc. (Nasdaq:CHTR-Free Report), Time Warner Cable Inc. (NYSE: TWC-Free Report) and Baker Hughes Inc. (NYSE: BHI-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:

Liberty Media Seeks All of SIRIUS XM

Liberty Media Corp. (Nasdaq:LMCA-Free Report) recently expressed its desire to take full control of SIRIUS XM Radio Inc. (Nasdaq:SIRI-Free Report), the largest satellite radio entertainment provider in the U.S. At present, Liberty media holds approximately 53% of SIRIUS XM. The new proposal will give Liberty Media a 100% stake and consequently SIRIUS XM will become a wholly owned subsidiary of the former.

Per the deal, in a tax-free transaction, each share of SIRIUS XM will be converted into 0.076 shares of a new issue of Liberty Media Series C common stock. The existing Series A and Series B shareholders of Liberty Media will get 2 shares in the Series C stocks for each share they possess.

After the completion of the whole transaction, the existing minority shareholders (excluding Liberty Media) of SIRIUS XM will control approximately 39% of Liberty Media. The deal is subject to the approval of a special committee of independent directors and public stockholders of SIRIUS XM, other than Liberty Media.

The decision to acquire a 100% ownership in SIRIUS XM is viewed as Liberty Media's attempt to consolidate its position in the U.S. cable TV industry. The company currently controls a 27.3% stake in Charter Communications Inc. (Nasdaq:CHTR-Free Report), the fourth largest pay-TV operator in the U.S.

Liberty Media is aggressively pursuing an idea so that Charter Communications can acquire Time Warner Cable Inc. (NYSE: TWC-Free Report), the second largest cable MSO (multi service operator) in the U.S. However, Charter needs to raise at least $25 billion for this takeover, which will significantly leverage the company's balance sheet. In that case, Liberty Media may need to inject funds for Charter Communications.

A full control of SIRIUS XM will immediately raise Liberty Media's market capitalization to approximately $27 billion from the current level of about $16 billion. Similarly, annual EBITDA (earnings before interest, tax, depreciation and amortization) of Liberty Media will jump from $1.4 billion to around $2.6 billion. Liberty Media will also gain approximately $625 million of annual free cash flow of SIRIUS XM.

Currently, both Liberty Media and Charter Communications carry a Zacks Rank #3 (Hold) while both SIRIUS XM and Time Warner Cable carry a Zacks Rank #2 (Buy).

U.S. Drilling Rig Count Falls

In its weekly release, Houston-based oilfield services company Baker Hughes Inc. (NYSE: BHI-Free Report) reported a dip in the U.S. rig count (number of rigs searching for oil and gas in the country). This fall can be traced back to a decrease in the tally of both oil and gas-directed rigs.

The Baker Hughes' data, issued since 1944, acts as an important yardstick for energy service providers 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 1,751 for the week ended Jan 3, 2014. This was down by 6 from the previous week's rig count and indicates the third decrease in 3 weeks.

Despite this, the current nationwide rig count is almost double the lowest level reached in recent years (876 in the week ended Jun 12, 2009), though it is still below the prior-year level of 1,762. 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 descended by 6 to 1,670, while inland waters activity and offshore drilling remained steady at 20 to 61 units, respectively.

Natural Gas Rig Count: The natural gas rig count – which last year slumped to its lowest point since Jun 1995 – decreased for the first time in 3 weeks to 372 (a drop of 2 rigs from the previous week). As per the most recent report, the number of gas-directed rigs is down by 54% from its recent peak of 811, achieved in 2012.

Moreover, 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 439 active natural gas rigs.

Oil Rig Count: The oil rig count – that rocketed to a 25-year high of 1,432 in Aug 2012 – fell by 4 to 1,378. Nevertheless, it has recovered strongly from a low of 179 in Jun 2009, rising 7.7 times.

Miscellaneous Rig Count: The miscellaneous rig count (primarily drilling for geothermal energy) at 1 remained unchanged from the previous week.

Rig Count by Type: The number of vertical drilling rigs fell by 10 to 377, 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 4 to 1,374. In particular, horizontal rig units – that reached an all-time high of 1,193 in May 2012 – increased by 2 from the last week's level to 1,148.

Gulf of Mexico(GoM): The GoM rig count was remained steady at 59. Both oil and gas rigs were unchanged from their week-ago levels of 39 and 20, respectively.

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

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