CHICAGO, April 16, 2013 /PRNewswire/ -- Zacks Equity Research highlights Plum Creek Timber Company (NYSE:PCL) as the Bull of the Day and Chiquita Brands International (NYSE:CQB) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Plains Exploration & Production (NYSE:PXP), BP plc (NYSE:BP) and Royal Dutch Shell plc (NYSE:RDS.A).
For many years, housing was a huge drag on the economy, acting as a dark cloud over the broad market. No more is this the case though, as many believe the housing market is back on track, at least evidenced by recent price action and reasonably strong data.
Prices are higher in many markets, while there is actually some optimism over the future in this critical corner of the economy. And with low mortgage rates, steady unemployment, and strong consumer confidence, many believe this trend can continue.
Obviously, this has been great news for homebuilders and mortgage companies, but it has also helped firms that provide resources for home construction, such as timber. Companies that dominate this space have largely flown under the radar—when compared to their homebuilding cousins—but are largely exposed to the same market forces, and have been big winners thanks to the resurgence in housing as well.
One company that occupies this space—and a huge beneficiary of the trend—is Plum Creek Timber Company (NYSE:PCL). The firm is the second largest private timberland owner in the U.S. and thus often takes its cues from the overall housing market.
This has been great news as of late, as PCL has added about 25% over the past year, and about 14% so far in 2013. Many believe that this trend can certainly continue, especially if housing keeps improving as we get further into Q2.
While many consumer stocks have had a solid start to 2013, some food providers have not been able to keep up. In particular, Chiquita Brands International (NYSE:CQB ) , despite its famous brand name and solid position in the banana market, has been floundering.
The company has struggled with heavy competition in its vital banana business and hasn't seen anything in terms of growth in years. This is both on the earnings and revenue fronts, suggesting broad weakness for the firm.
While competition and commodity prices are partly to blame, management has made its share of mistakes as well. The company recently went into a restructuring, and it has had trouble righting the ship.
In fact, the stock has lost about 10% in the past year compared to a roughly 20% gain the same time frame for the broad consumer sector. And over longer time frames, it is even worse as CQB has lost about 50% in the trailing two year period, suggesting that this has been a long move lower for this troubled company.
This troubling trend doesn't look to be shaken anytime soon, especially when looking at earnings estimate revisions. For the current quarter, the consensus called for 43 cents 60 days ago and now that figure is down to just 17 cents a share today.
We have upgraded our recommendation on Plains Exploration & Production (NYSE:PXP) to Outperform from Neutral. The company currently has a Zacks Rank #2 (Buy).
Why the Upgrade?
As of Dec 31, 2012, Plains Exploration & Production's cash balance was $180.6 million and cash from operating activities was $1.3 billion in 2012. On Dec 31, 2012, the company's outstanding borrowings and letters of credit outstanding under the revolving credit facility were $1.6 billion and $2.2 million, respectively.
The strong financial condition enables Plains Exploration & Production to spend $2.1 billion under its 2013 capital spending program excluding acquisitions. At present, the company is focusing on expanding and upgrading its existing high quality, low cost and high return assets apart from adding new ones. The company also continues with the development and drilling activities at the deepwater assets at the Gulf of Mexico, and properties in Eagle Ford Shale and California.
In addition, Plains Exploration & Production has completed a number of significant deals during 2012. To enhance coverage in the Gulf of Mexico, it acquired an oil and gas interest from BP plc (NYSE:BP ). The company also obtained a 50% working interest in the Holstein Field located in the Gulf of Mexico from Royal Dutch Shell plc (NYSE:RDS.A ).
The strong financial position also allows Plains Exploration & Production to enhance its shareholders' value through share repurchase. In 2012, the company repurchased 2.4 million shares utilizing $88.5 million, which is part of a $1 billion authorization program valid up to Jan 2016.
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.
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