Zacks Bull and Bear of the Day Highlights: PetroChina, Bank of America, The Goldman Sachs Group, Citigroup and JPMorgan Chase & Co.
CHICAGO, April 20, 2011 /PRNewswire/ -- Zacks Equity Research highlights PetroChina Co. (NYSE: PTR) as the Bull of the Day and Bank of America (NYSE: BAC) the Bear of the Day. In addition, Zacks Equity Research provides analysis on The Goldman Sachs Group Inc.'s (NYSE: GS), Citigroup Inc. (NYSE: C) and JPMorgan Chase & Co. (NYSE: JPM).
View Full analysis of all these stocks
(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)
Here is a synopsis of all five stocks:
We are upgrading PetroChina Co. (NYSE: PTR) ADRs to Outperform from Neutral, reflecting its leverage to the fast-growing Chinese market and the turnaround in commodity prices. Being one of only two Chinese integrated oil companies, PetroChina is well-positioned to capitalize on these favorable trends.
We also like the company's recent agreement to buy half of EnCana's prolific Cutbank Ridge shale natural gas assets. Attractive growth prospects in the downstream and natural gas sectors are other positives in the PetroChina story.
The company's long-term outlook is compelling, despite some near- to medium-term concerns that include heavy exposure to significantly mature-producing areas, high-priced gas imports and uncertainty regarding the impact of the newly rolled-out national resources tax.
Bank of America's (NYSE: BAC) first-quarter 2011 earnings came in substantially lower than the Zacks Consensus Estimate. Lower top line and higher non-interest expense were primarily responsible for lower-than-expected results. Reduced mortgage banking income and higher litigation expenses were also among the negatives.
The Federal Reserve's objection to the company's proposed capital deployment in the second half of 2011 remains a major headwind at this point. After reviewing the results, we are maintaining our Underperform recommendation on the shares.
We are also concerned about Bank of America's elevated cost structure. Non-interest expense rose significantly during the last two quarters of 2010. As the company is in the process of addressing legacy issues and continues to invest in its franchise, expenses are expected to remain high through 2011.
Latest Posts on the Zacks Stock Analysis Blog
Goldman Beats on Fundamentals
The Goldman Sachs Group Inc.'s (NYSE: GS) first-quarter 2011 earnings per share of $4.38 significantly outpaced the Zacks Consensus Estimate of 79 cents.
Including the preferred dividend of $1.64 billion related to the redemption of Goldman's Series G Preferred Stock, earnings per common share came in at $1.56 compared with $3.79 in the prior quarter and $5.59 in the prior-year quarter.
Coupled with the improving economic conditions, the company gained from a solid balance sheet and global clients. Considering prior-year quarter comparison, total revenue increased, though poor performance was recorded in Institutional Client Services division. Yet, operating expenses also augmented.
Net income applicable to common shareholders in the quarter was $908 million, compared with $2.2 billion in the prior quarter and $3.3 billion in the prior-year quarter.
Behind the Headlines
Total revenue of Goldman increased 38% from the prior quarter and decreased 7% year over year to $11.9 billion. Revenue reported surpassed the Zacks Consensus Estimate of $10.1 billion, primarily due to improved client activity level.
Quarterly revenue, as per business segments, is as follows:
Investment Banking division generated revenues of $1.27 billion, up 5% year over year. Results reflected higher-than-expected revenues from both debt and equity underwriting, primarily reflecting an increase in client activity, partially offset by lower revenues from the financial advisory business.
Institutional Client Services division recorded revenues of $6.65 billion, down by a significant 22% year over year. Results deteriorated due to a decrease in revenues in equity trading (down 7% year over year) and a decline in Fixed Income, Currency and Commodities (FICC). Though client activity levels improved during the quarter aided by solid performances in credit products, interest rate products, currencies and mortgages, net revenues were lower compared with the prior-year quarter.
Investing and Lending division booked revenues of $2.71 billion, up by a substantial 37% year over year. Results principally reflected a gain of $316 million from Goldman's investment in the ordinary shares of Industrial and Commercial Bank of China Limited (ICBC), a net gain of $1.05 billion from other equity securities and a net gain and net interest of $1.02 billion from debt securities and loans.
Investment Management division generated revenues of $1.27 billion, up 16% year over year. The year-over-year increase mainly reflected higher incentive fees and management and other fees.
In the first quarter of 2011, operating expenses inched up 3% to $7.85 billion compared with the prior-year quarter. Moreover, higher non-compensation expenses perpetrated the considerable rise in expenses.
Non-compensation expenses were $2.62 billion in the quarter, up 23% year over year. Expenses increased largely due to the impact of impairment charges of $220 million related to held for sale assets during the first quarter of 2011, associated with Litton Loan Servicing LP, Goldman's residential mortgage servicing subsidiary.
Evaluation of Capital
As of March 31, 2011, Goldman's Tier 1 capital ratio under Basel I was 14.6%, down from 16.0% as of December 31, 2010. Tier 1 common ratio under Basel I was 12.8%, compared with 13.3% as of December 31, 2010. Considerably the decrease in Tier 1 capital ratio reflects the impact of the redemption of Series G Preferred Stock.
As of the first quarter of 2011, return on equity, on an annualized basis, was 12.2%. Goldman's book value per share and tangible book value per share improved slightly to $129.40 and $119.63, in spite of the impact of preferred dividend.
Assets under management (AUM) remained flat year over year at $840 billion in the quarter with $12 billion of net appreciation and $12 billion of net outflows.
Share Repurchase and Dividend Update
During the first quarter of 2011, Goldman repurchased 9 million shares of its common stock, at an average cost per share of $163.22, for a total cost of $1.47 billion.
Goldman declared a dividend of 35 cents per share payable on June 29, 2011 to common shareholders of record as of June 1, 2011.
Performance by Peers
Comparing performances in Goldman's peer group, Citigroup Inc. (NYSE: C) reported positive results, a penny ahead of the Zacks Consensus Estimate. The result also improved from the prior-quarter earnings of 4 cents but fell short of 14 cents earned in the year-ago quarter.
The slightly better-than-expected result was driven by a fall in provisions for credit losses as well as benefits and claims. Yet the top-line headwind at Citigroup continued, with revenue dropping from the prior-year period and falling behind the Zacks Consensus Estimate. Expenses also increased year over year.
However, another peer of the company, JPMorgan Chase & Co. (NYSE: JPM), reported first-quarter earnings substantially ahead of the Zacks Consensus Estimate. JPMorgan reported net income of $5.6 billion or $1.28 per share, compared with $3.3 billion or 74 cents per share in the year-ago quarter. The better-than-expected numbers were primarily supported by a substantial slowdown in provision for credit losses and lower non-interest expense, which more than offset by a decrease in both interests.
Our Take
We expect Goldman to benefit from its well managed global franchise, strong capital base and industry leading position in trading and asset management. Moreover, improved client activity level and overall revenue enhancement coupled with Goldman's prudent business model and strong fundamentals are expected to deliver better earnings in the upcoming quarters.
During the reported quarter, Fitch Ratings also lifted its outlook on Goldman to 'Stable' from 'Negative.' The rating agency was impressed by Goldman's settlement of some of the legal and regulatory disputes that resulted in Negative rating outlook in May 2010. Further, Goldman's steady earnings performance along with maintaining a leading investment banking franchise drives Fitch to provide a Stable Outlook on the company.
However, with the new banking regulations, there will be pressure on fees income growth. Further, we expect net interest income to remain depressed at least though the first half of 2011.
Goldman currently retains its Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we are maintaining our Neutral recommendation on the stock.
Get the full analysis of all these stocks
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About the Analyst Blog
Updated throughout every trading day, the Stock Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment
Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.
Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/ZacksInvestmentResearch
Subscribe to our YouTube Channel: http://www.youtube.com/user/ZacksInvestmentNews
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Media Contact
Zacks Investment Research
http://www.zacks.com
800-767-3771 ext. 9339
[email protected]
SOURCE Zacks Investment Research, Inc.
Share this article