The Zacks Analyst Blog Highlights:PeabodyEnergy, CONSOL Energy, Otter Tail, Wisconsin Energy and ExxonMobil

Jan 28, 2013, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Jan. 28, 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 Peabody Energy (NYSE: BTU), CONSOL Energy Inc. (NYSE: CNX), Otter Tail Corporation (Nasdaq:OTTR), Wisconsin Energy Corp. (NYSE: WEC) and ExxonMobil Corporation (NYSE: XOM).


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Here are highlights from Friday's Analyst Blog:

Peabody Likely to Miss

PeabodyEnergy (NYSE: BTU) will release its fourth quarter 2012 financial results before the market bell on Jan 29, 2013. In the prior quarter, this coal operator reported a 50.00% earnings surprise. Peabody currently has a Zacks Rank #5 (Strong Sell). Let's see how things are shaping up at Peabody prior to this announcement.

Factors to Consider This Quarter

2012 was overall a dull year for the coal industry as coal companies continued to face the brunt of a mild winter, rising competition from natural gas producers, increasing usage of alternate energy for electricity generation and compliance with increasing government regulation making their operations costlier.

Peabody's underground Willow Lake Mine in Southern Illinois met with an accident in Nov 12, and the company decided to permanently idle the mine as it failed to comply with acceptable security standards. This closure will result in a charge of 10 cents to 15 cents (after tax) in the fourth quarter.

The company tried to sharpen its competitive edge and strengthen its global operation by making changes to the top management in both American and Australian business units.

Earnings Whispers

Accordingly, our proven model does not conclusively show that Peabody Energy is likely to beat earnings this quarter. That is because a stock needs to have both a positive earnings Expected Surprise Prediction (ESP) (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3 for this to happen. This is not the case here.

Positive Zacks ESP:  This is because the Most Accurate estimate stands at 28 cents while the Zacks Consensus Estimate is lower at 26 cents, resulting in +7.69% ESP.

Zacks Rank #5 (Strong Sell): Peabody's Zacks Rank #5 complicates the forecasting power of ESP making surprise prediction difficult. Even though Peabody registered earnings surprise in the last four quarters, we caution investors against the stock going into the earnings announcement, especially with the company observing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies which are linked with the coal industry you may want to consider on the basis of our model which shows that they have the right combination of elements to post an earnings beat this quarter:

CONSOL Energy Inc. (NYSE: CNX) has earnings ESP of +18.18% and carries a Zacks Rank #3 (Hold).

Otter Tail Corporation (Nasdaq:OTTR) has earnings ESP of +6.67% and carries a Zacks Rank #3 (Hold).

Wisconsin Energy Corp. (NYSE: WEC) has earnings ESP of +2.38% and carries a Zacks Rank #1 (Strong Buy).

Exxon Strikes Oil in Colombia

U.S. energy major ExxonMobil Corporation (NYSE: XOM) has encountered oil in exploration well Mono Arana 1, in the Middle Magdalena Valley of Colombia on the VMM2 block.

The Mono Arana 1 well was drilled to evaluate the hydrocarbon potential of a shallow conventional Tertiary Lisama sandstone reservoir and deeper shale and carbonate reservoirs in La Luna and Tablazo oil source rocks. The well was spud on Sep 23, to a depth of 9,942 feet in the Cretaceous La Luna structure.

ExxonMobil owns a 70.1% stake in the VMM2 block, while partners Canacol Energy Ltd. And and Vetra Exploracion y Produccion Colombia hold a 20% and 9.9% interest, respectively.

The drilling of the La Luna section shows encouraging results as around 760 feet of the section witnessed superior hydrocarbon deposits throughout the entire interval. The associate partners plan to test results from the La Luna later this year, after ExxonMobil takes over the operatorship of the Mono Arana 1 well.

Penetrating at roughly 4800 feet deep in the Lisama formation, the results show that it holds around 85 feet of potential net oil pay with an average porosity of 21% in three main zones. The company stated that two intervals flowed at a combined average gross rate of 1,242 barrels of oil per day during a short-term test in the tertiary Lisama sandstone.

The associated partners in the venture expect to evaluate and bring into commercial production the Lisama oil discovery in 2014. Further appraisal of the La Luna structure is also designed for the second quarter as it encountered high pressure while drilling the operation.

Although we remain skeptical due to ExxonMobil's continued disappointing production trend, we expect major capital projects and upstream ventures to drive 2013 production volume. Additionally, the start-ups of Kearl and Kashagan and the production ramp up from 2012 start-ups in Angola and Nigeria are also added incentives.

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