The Zacks Analyst Blog Highlights: Chevron, Exxon Mobil, Range Resources, Abraxas Petroleum and Boeing

Zacks

For Immediate Release
 
Chicago, IL – April 07, 2014 – 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 the Chevron Corp. (CVX-Free Report), Exxon Mobil Corp. (XOM-Free Report), Range Resources Corp. (RRC-Free Report), Abraxas Petroleum Corp. (AXAS-Free Report) and  Boeing Company (BA-Free Report).
 
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Here are highlights from Friday’s Analyst Blog:

Chevron: Core Holding in Integrated Space

On Apr 2, 2014, we issued an updated research report on San Ramon, CA-based energy giant Chevron Corp. (CVX-Free Report). We continue to view the company as a core holding in the large-cap integrated space based on its relatively low-risk conglomerate business structure, fortress-like balance sheet, ample free cash flows even in a low oil price environment and growing dividends.

Chevron is one of the six super major oil and gas companies in the world and the second-largest energy firm in the U.S. behind Exxon Mobil Corp. (XOM-Free Report). As a vertically-integrated oil entity, it is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals, and other energy-related businesses.

Driven by the big Australian liquefied natural gas (LNG) projects (Gorgon and Wheatstone), as well as deepwater developments in the U.S. Gulf of Mexico, Chevron is targeting volume growth of 25% by 2017.

The company’s financial flexibility and strong balance sheet are real assets in this highly-uncertain period for the economy. Chevron remains in excellent financial health, with more than $16 billion in cash on hand and an investment-grade credit rating with a debt-to-capitalization ratio of just over 12%.

Management has established quite a track record of conservative capital management and cash returns to shareholders. It also pays a growing dividend, currently yielding an attractive 3.4%.

Chevron has targeted quarterly buybacks of up to $1 billion of its common stock since late 2010. We believe that the repurchase program not only highlights the company’s commitment to create value for shareholders but also underlines Chevron’s confidence in commodity prices.
However, as is the case with other companies engaged in the business of exploration and production, Chevron’s results are directly exposed to oil and gas prices, which are inherently volatile and subject to complex market forces. Realized prices could differ significantly from our estimates, thereby affecting the company’s revenues, earnings and cash flows.

Chevron has pegged its 2014 capital budget at a massive $39.8 billion. This is expected to substantially increase Chevron’s leverage and deteriorate its credit metrics. Additionally, the increasing capital intensity of its operations may result in reduced returns going forward.

Chevron currently carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

While we expect Chevron to perform in line with its peers and industry levels in the coming months and advice investors to wait for a better entry point before accumulating shares, one can look at Range Resources Corp. (RRC-Free Report) and Abraxas Petroleum Corp. (AXAS-Free Report) as good buying opportunities. While Range Resources holds a Zacks Rank #1 (Strong Buy), Abraxas Petroleum carries a Zacks Rank #2 (Buy).

Boeing Q1 Deliveries Show Continued Uptrend
 
Aerospace giant The Boeing Company (BA-Free Report) reported strong numbers for first quarter 2014 deliveries, with commercial deliveries jumping almost 18% year over year. This commercial aerospace behemoth is indeed flying high in spite of the many technical glitches weighing upon it and its popular Dreamliner model. Boeing’s share price closed at $128.78 on Apr 3, reflecting a gain of 55.6% over the last twelve-month period. The company has delivered a one-year return of about 50.0%, outperforming the S&P’s return of 20.4%.
 
In its first quarter of 2014, Boeing delivered 161 airplanes, approximately 17.5% higher than the year-ago number. During the quarter, the Next Generation 737 model continued to be the pillar of Boeing’s strength in the commercial airplane sector with deliveries of 115 airplanes, followed by its 777 model with 24 deliveries. Both these models continue to perform better than competing models owing to their fuel efficiency and lower operating costs. In the year-earlier period, the company had delivered 102 units of the 737 and 24 units of the 777 model.
 
Boeing also delivered 18 787s during the first quarter 2014, while delivering only 1 unit in the year-ago period.
 
Meanwhile, Boeing’s deliveries in the defense and space business numbered 46 in the first quarter 2014 compared with 45 in the comparable period last year. In the quarter under review, numbering among the total deliveries were 17 Chinook helicopters, 11 F/A-18E/F and EA-18G fighter jets and 10 Apache helicopters. The company also delivered 4 units of F-15, 3 C-17 and 1 AEW&C.
 
The gradual recovery in the global economy is bringing in a steady improvement in passenger and freight traffic. This is amply reflected in Boeing’s record backlog of $441 billion at the end of 2013.
 
Despite setbacks and technical snags, its 787 Dreamliner continues to be a popular choice for major airlines. The company even boosted the production rate of its new 787 as well as the 737. Commercial Airplanes' 2014 deliveries are expected to be between 715 and 725 airplanes. This includes approximately 110 units of 787 deliveries.
 
Again, the fourth generation of the 737 family – the 737 Max – is a premier aircraft from Boeing’s stable and sees brisk demand in the single-aisle market for its fuel efficiency and low carbon dioxide emissions.
 
Given its impressive track record of both innovation and fuel efficiency, we expect Boeing to come out with record jet deliveries driven by strong commercial numbers in the future. Last year, jet deliveries reached an all-time high, beating Boeing’s own projection.

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