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The Zacks Analyst Blog Highlights: Exxon Mobil, Chevron, Spirit Airlines, EnLink Midstream, Phillips 66 and Azure Power Global
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For Immediate Release
Chicago, IL – November 29, 2018 – Zacks.com 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 Exxon Mobil Corporation (XOM), Chevron Corporation (CVX - Free Report) , Spirit Airlines, Inc. (SAVE - Free Report) , EnLink Midstream, LLC (ENLC - Free Report) , Phillips 66 (PSX - Free Report) and Azure Power Global Limited .
Here are highlights from Wednesday’s Analyst Blog:
Oil Prices Drop Like a Stone: Winners & Losers
In recent times, oil prices may have risen in one or two trading sessions. But, those are dead cat bounces! Lest we forget, oil has now lost nearly a third of its value amid volatility since early October.
For instance, the West Texas Intermediate (WTI) crude settled at $51.56 a barrel on the New York Mercantile Exchange on Nov 27 from a high of $76 a barrel reached on Oct 3. Some market pundits now caution that oil prices might be echoing the pattern of a few years ago, when oil prices had tanked more than half, from $90 a barrel in November 2014 to $41 in January 2016.
But, what led to the steep decline? Doubts about the Organization of Petroleum Exporting Countries’ (OPEC) resolve to curb production amid supply overhang and demand uncertainty have come together to push oil prices down.
OPEC, led by Saudi Arabia, recently showed interest in trimming its output in order to stabilize prices. However, Saudi Arabia ramped up production to all-time high in November, pumping 11.1 million to 11.3 million barrels per day (bpd) during the month. Confirmation that U.S. production is booming, especially doubling in shale production since 2012, has also led to the latest oil price retreat.
The supply-demand disparity, in fact, started to increase after the Trump administration decided to relax sanctions on the purchase of Iranian oil by granting waivers to eight buyers of Tehran’s crude. This drove oil prices lower into what would turn into an unprecedented decline.
President Trump, by the way, has been rooting for lower oil prices and has warned Saudi Arabia to avoid taking any action to check the downtrend. In return, Trump won’t be taking any action against Saudi Arabia for the assassination of journalist Jamal Khashoggi.
Meanwhile, apart from oversupply concerns, weakening demand affected the oil market. Apprehensions about a slowdown in the China economy owing to the ongoing Sino-U.S. trade disputes increased expectations of a fall in oil demand. After all, China is the world’s largest importer of oil and thus the largest driver of crude oil prices.
Moreover, the recent strength in the U.S. dollar weighed on dollar-denominated prices of oil, added Phil Flynn, senior market analyst at Price Futures Group. Let us now take a look at the potential winners and losers as oil prices fall at a steady clip:
Falling Oil Prices Put Pressure on E&P Companies
Exploration and Production (E&P) companies have always been perturbed by the continuous inflow of cash. After all, such cash inflows are required to finance their investment programs. However, such concerns were in the backburner after crude price rose this year.
At the end of the third quarter, U.S. E&P companies were able to cover capital spending from operating cash flows. Most of the U.S. E&P bigwigs, in fact, on average posted cash flows that were higher than their capital spending in the third quarter for the first time since 2011, with Exxon Mobil Corporation and Chevron Corporation, the country’s largest oil groups registering healthy profits from U.S. operations.
But, the collapse in oil prices over the past two months has raised fresh concerns about the possibility of further infusions of cash, something that doesn’t bode well for E&P companies. Lest we forget, in the third quarter, WTI crude price averaged $73 a barrel, and now it’s trading just above $50 a barrel.
Aviation, Refiners Poised to Gain
Aviation stocks traditionally have an inverse relationship with the movement of oil prices. So, it isn’t surprising that shares of aviation firms are rising after the sharp drop in crude oil prices. After all, fuel costs are major part of the operating costs for aviation firms; thus rise in oil prices will hit profit margins.
Refineries also stand to gain from the decline in crude oil prices. Refineries buy crude oil as their raw material. So, refineries’ net cash flow increases when crude oil prices fall.
Given this bullishness, some of the top-ranked aviation and refinery stocks one could consider are Spirit Airlines, Inc., EnLink Midstream, LLC and Phillips 66.
Spirit Airlines provides low-fare airline services. The company currently has a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for its current-year earnings rose 9.4% in the last 60 days. The company’s expected earnings growth rate for the current year is 11.7% against the Transportation - Airline industry’s projected decline of 4.6%.
EnLink Midstream focuses on providing midstream energy services in the United States. The company is involved in natural gas gathering, treating, processing, transmission, distribution, supply and marketing, and crude oil marketing. The company currently has a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its current-year earnings soared 91.7% in the last 60 days. The company’s expected earnings growth rate for the current quarter is more than 100% compared with the Oil and Gas - Refining and Marketing industry’s estimated decline of 67.2%.
Phillips 66 is an energy manufacturing and logistics company. It operates through four segments: Midstream, Chemicals, Refining, and Marketing and Specialties (M&S). The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings moved up 11.8% in the last 60 days. The company’s expected earnings growth rate for the current year is 100.5% compared with the Oil and Gas - Refining and Marketing industry’s expected increase of 7.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Oil Price Drop to Benefit Emerging Markets
Steady drop in oil prices is also likely to benefit importers like Turkey, South Africa and India. Cheaper black gold will boost their balance of payments and support GDP growth. Capital Economics chipped in and said that with every $10 per barrel drop in the oil price, oil importing emerging economies’ income gain by 0.5-0.7% of GDP.
This, certainly, calls for investing in fundamentally sound companies from the aforesaid emerging economies. One of the best ranked stocks you may consider is Azure Power Global Limited. The company that produces and develops solar energy carries a Zacks Rank #2, while it’s expected earnings growth rate for the next quarter is a whopping 1,500% compared with the Solar industry’s expected increase of 111%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
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 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.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights: Exxon Mobil, Chevron, Spirit Airlines, EnLink Midstream, Phillips 66 and Azure Power Global
For Immediate Release
Chicago, IL – November 29, 2018 – Zacks.com 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 Exxon Mobil Corporation (XOM), Chevron Corporation (CVX - Free Report) , Spirit Airlines, Inc. (SAVE - Free Report) , EnLink Midstream, LLC (ENLC - Free Report) , Phillips 66 (PSX - Free Report) and Azure Power Global Limited .
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Wednesday’s Analyst Blog:
Oil Prices Drop Like a Stone: Winners & Losers
In recent times, oil prices may have risen in one or two trading sessions. But, those are dead cat bounces! Lest we forget, oil has now lost nearly a third of its value amid volatility since early October.
For instance, the West Texas Intermediate (WTI) crude settled at $51.56 a barrel on the New York Mercantile Exchange on Nov 27 from a high of $76 a barrel reached on Oct 3. Some market pundits now caution that oil prices might be echoing the pattern of a few years ago, when oil prices had tanked more than half, from $90 a barrel in November 2014 to $41 in January 2016.
But, what led to the steep decline? Doubts about the Organization of Petroleum Exporting Countries’ (OPEC) resolve to curb production amid supply overhang and demand uncertainty have come together to push oil prices down.
OPEC, led by Saudi Arabia, recently showed interest in trimming its output in order to stabilize prices. However, Saudi Arabia ramped up production to all-time high in November, pumping 11.1 million to 11.3 million barrels per day (bpd) during the month. Confirmation that U.S. production is booming, especially doubling in shale production since 2012, has also led to the latest oil price retreat.
The supply-demand disparity, in fact, started to increase after the Trump administration decided to relax sanctions on the purchase of Iranian oil by granting waivers to eight buyers of Tehran’s crude. This drove oil prices lower into what would turn into an unprecedented decline.
President Trump, by the way, has been rooting for lower oil prices and has warned Saudi Arabia to avoid taking any action to check the downtrend. In return, Trump won’t be taking any action against Saudi Arabia for the assassination of journalist Jamal Khashoggi.
Meanwhile, apart from oversupply concerns, weakening demand affected the oil market. Apprehensions about a slowdown in the China economy owing to the ongoing Sino-U.S. trade disputes increased expectations of a fall in oil demand. After all, China is the world’s largest importer of oil and thus the largest driver of crude oil prices.
Moreover, the recent strength in the U.S. dollar weighed on dollar-denominated prices of oil, added Phil Flynn, senior market analyst at Price Futures Group. Let us now take a look at the potential winners and losers as oil prices fall at a steady clip:
Falling Oil Prices Put Pressure on E&P Companies
Exploration and Production (E&P) companies have always been perturbed by the continuous inflow of cash. After all, such cash inflows are required to finance their investment programs. However, such concerns were in the backburner after crude price rose this year.
At the end of the third quarter, U.S. E&P companies were able to cover capital spending from operating cash flows. Most of the U.S. E&P bigwigs, in fact, on average posted cash flows that were higher than their capital spending in the third quarter for the first time since 2011, with Exxon Mobil Corporation and Chevron Corporation, the country’s largest oil groups registering healthy profits from U.S. operations.
But, the collapse in oil prices over the past two months has raised fresh concerns about the possibility of further infusions of cash, something that doesn’t bode well for E&P companies. Lest we forget, in the third quarter, WTI crude price averaged $73 a barrel, and now it’s trading just above $50 a barrel.
Aviation, Refiners Poised to Gain
Aviation stocks traditionally have an inverse relationship with the movement of oil prices. So, it isn’t surprising that shares of aviation firms are rising after the sharp drop in crude oil prices. After all, fuel costs are major part of the operating costs for aviation firms; thus rise in oil prices will hit profit margins.
Refineries also stand to gain from the decline in crude oil prices. Refineries buy crude oil as their raw material. So, refineries’ net cash flow increases when crude oil prices fall.
Given this bullishness, some of the top-ranked aviation and refinery stocks one could consider are Spirit Airlines, Inc., EnLink Midstream, LLC and Phillips 66.
Spirit Airlines provides low-fare airline services. The company currently has a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for its current-year earnings rose 9.4% in the last 60 days. The company’s expected earnings growth rate for the current year is 11.7% against the Transportation - Airline industry’s projected decline of 4.6%.
EnLink Midstream focuses on providing midstream energy services in the United States. The company is involved in natural gas gathering, treating, processing, transmission, distribution, supply and marketing, and crude oil marketing. The company currently has a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its current-year earnings soared 91.7% in the last 60 days. The company’s expected earnings growth rate for the current quarter is more than 100% compared with the Oil and Gas - Refining and Marketing industry’s estimated decline of 67.2%.
Phillips 66 is an energy manufacturing and logistics company. It operates through four segments: Midstream, Chemicals, Refining, and Marketing and Specialties (M&S). The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings moved up 11.8% in the last 60 days. The company’s expected earnings growth rate for the current year is 100.5% compared with the Oil and Gas - Refining and Marketing industry’s expected increase of 7.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Oil Price Drop to Benefit Emerging Markets
Steady drop in oil prices is also likely to benefit importers like Turkey, South Africa and India. Cheaper black gold will boost their balance of payments and support GDP growth. Capital Economics chipped in and said that with every $10 per barrel drop in the oil price, oil importing emerging economies’ income gain by 0.5-0.7% of GDP.
This, certainly, calls for investing in fundamentally sound companies from the aforesaid emerging economies. One of the best ranked stocks you may consider is Azure Power Global Limited. The company that produces and develops solar energy carries a Zacks Rank #2, while it’s expected earnings growth rate for the next quarter is a whopping 1,500% compared with the Solar industry’s expected increase of 111%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>
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 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.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.