The Zacks Analyst Blog Highlights:Patterson-UTI Energy, Verizon Communications, Vodafone Group, AT&T and Sprint
CHICAGO, Feb. 26, 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 Patterson-UTI Energy Inc. (Nasdaq:PTEN-Free Report), Verizon Communications Inc. (NYSE:VZ-Free Report), Vodafone Group plc (Nasdaq:VOD-Free Report), AT&T, Inc. (NYSE:T-Free Report) and Sprint Corporation (NYSE:S-Free Report).
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Here are highlights from Tuesday's Analyst Blog:
Patterson-UTI Now a Strong Buy
On Feb 22, Zacks Investment Research upgraded Houston, Texas-based onshore contract driller Patterson-UTI Energy Inc. (Nasdaq:PTEN-Free Report) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Patterson-UTI had a good 2013, beating the Zacks Consensus Estimate in three out of four quarters, with the most recent quarter reporting a 27% positive surprise. Investors are also bullish on the company based on its dividend story and share repurchase program.
Detailed Analysis
On Feb 6, Patterson-UTI reported fourth earnings of 28 cents per share, much above the Zacks Consensus Estimate of 22 cents amid an increase in rig revenues. Reported revenues for the quarter surpassed both the Zacks Consensus Estimate as well the year-ago quarter level.
Additionally, Patterson-UTI approved a quarterly cash dividend of 10 cents per share, representing a sequential hike of 100.0%. The announcements had a positive impact on investors as the stock price shot up 13.4% to $27.87 on Feb 6.
The bullishness does not end there. The momentum carried the stock further up, over 9% since the reported earnings, to reach $30.40 on Feb 24. The intraday high of $30.67 also marked the new 52-week high for the company.
Patterson-UTI's growing premium land rig fleet and the expected demand uptick for such services also works in its favor. The company's new rigs and efficient equipment should give Patterson-UTI Energy an edge over competitors and help it weather the current volatile environment better than some of its peers.
We expect this growth to continue for Patterson-UTI. In the past 30 days, there have been 9 upward revisions in the current quarter estimates, increasing the consensus from 23 cents to 29 cents. The 11 upward estimate revisions for the current year has resulted in an increase in the consensus estimate from $1.12 per share to $1.32.
Verizon Stalls Stock Buyback
Leading telecommunication service provider, Verizon Communications Inc. (NYSE:VZ-Free Report) has reportedly ruled out share repurchase for the next two to three years. The company's current focus is on lowering the debt level following its $130 billion buyout of Vodafone Group plc's (Nasdaq:VOD-Free Report) 45% interest in Verizon Wireless.
While the acquisition might have imposed significant debt on the company's balance sheet, it is expected to catapult greater financial synergies given total control over Wireless business. The buyout will also provide a competitive advantage over peers like AT&T, Inc. (NYSE:T-Free Report) and Sprint Corporation (NYSE:S-Free Report).
The company in its press release on Monday detailed its financial targets for 2014. It expects consolidated revenue growth of 4% and projects increased adjusted consolidated EBITDA margin supported by Wireless and Wireline growth. Last year, Verizon registered consolidated operating income margin of 26.5% along with adjusted consolidated EBITDA margin of 34.9%.
Verizon continues to focus on maximizing free cash flow as capital efficiency (capital expenditure-to-revenues ratio) is showing steady improvement. Concurrent with management's expectation, the company's CapEx to revenues ratio improved to 13.8% in 2013 from 14% in 2012. For 2014, management expects capital expenditure in the range of $16.5–$17 billion with continued improvement in annual CapEx to revenues ratio. The company ended the year with net debt of $40.1 billion, lower than $48.9 billion at 2012 end. Net debt to adjusted EBITDA ratio was about 1x compared with 1.3x as of Dec 31, 2012.
While the company may have decided to de-emphasize share repurchase for the near term, it currently considers dividend payment as a significant mode of investor return and expects to prioritize the same. As a result, in Sep 2013, the company's board of directors approved a 2.9% hike in its quarterly dividend to $0.53 per share, representing a dividend increase for the seventh consecutive year.
Verizon currently has a Zacks Rank #3 (Hold).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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