Zacks Analyst Blog Highlights: Dell, Hewlett-Packard, Overseas Shipholding Group, Frontline and Teekay

Mar 15, 2011, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, March 15, 2011 /PRNewswire/ -- Analyst Blog features: Dell Inc. (Nasdaq: DELL), Hewlett-Packard Company (NYSE: HPQ), Overseas Shipholding Group Inc. (NYSE: OSG),  Frontline Ltd. (NYSE: FRO) and Teekay Corp. (NYSE: TK).


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Here are highlights from Monday's Analyst Blog:

Dell on the Move

Computing major Dell Inc. (Nasdaq: DELL) is continuing on its deal winning spree. Recently, the company announced a two-year extension with The Massachusetts Health Connector Authority (Health Connector). Per the agreement, the technology major will provide solutions for a range of enrollment, billing, website and customer experience services.

The deal focuses on services that Massachusetts Health will provide through "Commonwealth Care," a low-cost health insurance option. Dell is currently applying its technical know-how and best practices to other state government organizations that the company has developed in association with Health Connector.

Dell also provides maintenance services for the company's portals, which meet specific healthcare needs of individuals. Although this is a renewal agreement, Dell did not disclose the financial details.

Dell also clinched another six-year information technology outsourcing deal with TUI Travel plc, a company under TUI AG, a renowned European travel group. As usual, Dell did not comment on the financial impact, but said that it would provide hardware and software asset management, as well as help desk, printer management, patch management, deployment, software compliance, and other services in the UK, Germany, France, Spain, the Netherlands and Switzerland.

Apart from winning meaningful deals at regular intervals, the company continues to benefit from the enterprise PC upgrade cycle, server upgrades and server virtualization. Although Hewlett-Packard Company (NYSE: HPQ) is the market leader in the PC segment, of late, Dell has been seeing market share gains in the developing world. This is expected to catalyze its business growth over the long term and result in more deal wins from the region.

Moody's Downgrades OSG

Overseas Shipholding Group Inc. (NYSE: OSG), a leading energy products transportation company, recently suffered a setback as Moody's Investor Service downgraded its credit ratings. Primary reason for this downgrade is the continuously falling oil tanker rates attributable to significant increase in supply of tankers.

Moody's downgraded the corporate family and default ratings of Overseas Shipholding to "B1" from "Ba2." At the same time, the rating agency also lowered the senior unsecured debt to "B2" from "Ba3."

Overseas Shipholding reported mounting losses in the fourth quarter of 2010. The company has a massive 70% spot exposure. The average spot rate of oil tanker fell 55% in the last quarter, which significantly eroded the company's bottom line.

The oil tanker industry is highly competitive and fragmented. Overseas Shipholding competes with large U.S. and international flag tankers. Its major competitors include Frontline Ltd. (NYSE: FRO) and Teekay Corp. (NYSE: TK).

Also, spot freight rates are extremely volatile. Fuel is the largest expense in shipping operations when vessels are under spot charter and increase in fuel prices may hurt profitability.

Nevertheless, Overseas Shipholding maintains a state-of-the-art fleet of vessels with major emphasis on quality, safety, and environmental issues.In late 2010, Overseas Shipholding completed an organizational restructuring.

Management decided to focus on three core areas: crude oil, international products, and U.S. Flag. The company shifted its standalone LNG carrier management business to its International Product Carrier and Gas Strategic business unit.

 As a result of global economic improvement, we believe fundamentals of the oil tanker industry remain compelling. Recent political turmoil in the Arab countries may also raise demand for oil tankers at least for the short term.

Importantly, in the previous quarter, the U.S. Flag business rose 12% year over year. The company now expects this segment to contribute positively in 2011 compared with an operating loss of $35 million in 2010.

We maintain our long-term Neutral recommendation on Overseas Shipholdong. Currently, it holds a short-term Zacks #3 Rank (Hold) on the stock.

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