Zacks Bull and Bear of the Day Highlights: Marathon Petroleum, Buckeye Partners, Wells Fargo, Bank of America and JPMorgan Chase
CHICAGO, Oct. 30, 2012 /PRNewswire/ -- Zacks Equity Research highlights Marathon Petroleum Corp. (NYSE:MPC) as the Bull of the Day and Buckeye Partners (NYSE:BPL) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Wells Fargo & Co. (NYSE:WFC), Bank of America Corp. (NYSE:BAC) and JPMorgan Chase & Co. (NYSE:JPM).
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Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
We are maintaining our Outperform recommendation on Marathon Petroleum Corp. (NYSE:MPC). Spun out of parent Marathon Oil Co. in 2011, the company is a leading refiner and marketer of petroleum products in the U.S.
Our bullish investment theme stems from Marathon Petroleum's scale advantage, impressive asset quality, and an extensive midstream/retail network that diversifies its portfolio and provides more stable revenue streams. We believe management's recently commenced $2 billion share repurchase program and the proposed acquisition of BP's Texas City refinery could further boost shareholder value.
Marathon Petroleum's low debt ratio and hefty cash balance add to the positive sentiment. All in all, we believe the company is well positioned going forward and view it as an attractive investment.
We downgrade our recommendation from Neutral to Underperform for Buckeye Partners (NYSE:BPL) on account of high fuel and diesel price sensitivities which could negatively influence the master limited partnership's short-term top-line growth.
In addition, uncertain outcomes on the airline tariff case and recent proposal for implementation of market-based rates for petroleum product supply to federal regulatory body are issues that will not bode well with the partnership's growth. Other potential risks include unplanned damages to pipeline and plant infrastructures as well as an intense competitive environment.
Over the last five years, the partnership's shares have traded in the P/E multiple range of 10.3x to 25.0x on trailing 12-month earnings. We downgrade our recommendation to Underperform with target price of $44.00 per unit, which is based on 16.4x 2012 earnings estimate.
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Wells Fargo Loses Bid
Issues related to overdraft fees are far from over for Wells Fargo & Co. (NYSE:WFC). Last week, a bid to compel arbitration of customer disagreements related to overdraft fees was lost by the company, according to a Bloomberg report.
According to the Atlanta based U.S. Appeals Court ruling, the settlement cannot be compelled by the bank following the relinquishment of its right to do so twice earlier. The ruling came amidst the rejection of the bank's proposition to discharge a class-action lawsuit.
On investigation, it was found by the court that prior to affirming its right to compel the customers to negotiate their disputes, the customers of Wells Fargo had to undergo a long litigation process which continued for years and resulted in around 900,000 documents. However, as expected, the ruling came as a disappointment for Wells Fargo and the company contemplates to preserve its stand on this litigation.
The Allegation
As a matter of fact, customers have sued Wells Fargo for charging improper overdraft fees. The company was charged of having manipulated transaction entries to generate greater overdraft fees. Transactions were re-sequenced by the bank so that the largest withdrawals were deducted first instead of being cleared in the order in which they were received.
As a result, customers' balances dwindled faster, resulting in a larger number of 'overdrawn' transactions, each of which then became chargeable. Moreover, as a result of such practices, funds were overdrawn several times a day in small amounts.
In addition to Wells Fargo, over 30 banks have been sued on similar grounds. Notably, Bank of America Corp. (NYSE:BAC) and JPMorgan Chase & Co. (NYSE:JPM) have consented to paying millions to settle such claims in the past few quarters. Thus Wells Fargo's fate relating to this litigation will be closely followed. Notable, the suit against the other banks are still unsettled in the Miami federal court.
However, in November 2009 and April 2010, Wells Fargo refused an offer from a trial court to negotiate the disputes. However, following the Supreme Court ruling in April, which stated that federal law permits companies to force customers and employees to settle claims individually, a motion was filed by Wells Fargo to discharge a number of proposed class-action lawsuits.
Our Take
We believe that fraudulent practices by any bank need to be judged stringently and if customers were found having been cheated of their hard earned money, they would need to be duly compensated.
Wells Fargo retains a Zacks #3 Rank, which translates into a short-term Hold recommendation. Considering its fundamentals, we also have a Neutral recommendation on the stock.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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