For Immediate Release
Chicago, IL – July 25, 2012 – 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 CNOOC Ltd. (CEO), Nexen Inc. (NXY), Tractor Supply Company (TSCO), The Home Depot Inc. (HD) and Lowe’s Companies Inc. (LOW).
Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513
Here are highlights from Tuesday’s Analyst Blog:
CNOOC in $15B Int’l Takeover Deal
Chinese energy giant CNOOC Ltd. (CEO) has cut a deal to purchase Canadian energy producer Nexen Inc. (NXY) for approximately $15.1 billion in cash. The deal, the country’s biggest foreign takeover so far, reflects the international land grab trend among the Chinese energy companies.
Per the agreement, CNOOC will buy all the outstanding common shares of Nexen at $27.50 per share, representing a premium of 61% to its closing price on the New York Stock Exchange on July 20. The deal, which is expected to be wrapped up by this year-end, requires approval by two-thirds of Nexen’s shareholders as well as approvals from regulators, including those in the U.S.
China's third-largest oil company, CNOOC, expects to fund the acquisition with its existing cash resources and outside financing. It also added that Nexen's debts of about $4.3 billion would remain outstanding.
Upon the successful completion of the deal, CNOOC will list its shares on the Toronto Stock Exchange. It will also retain Nexen’s existing employees, and establish Calgary as its North and Central American headquarters. CNOOC also added that Nexen can terminate the deal and consider a better proposal, but in doing so, it will have to pay CNOOC $425 million as a breakup fee.
CNOOC’s current production gives it only nine years worth of reserves that represents one of the lowest reserves among key oil companies in the world. The upcoming deal would raise CNOOC’s proven reserves by 30% and will help it to vastly expand its holdings in Canada, where it has already spent about $2.8 billion since 2005. Moreover, buying Nexen would make CNOOC the operator of the largest oil field in the U.K. and the biggest contributor to Forties Blend crude − Buzzard.
China being the world's second- largest economy has a huge energy requirement. The acquisition of Nexen is in sync with the present strategy of CNOOC and other Chinese biggies to make a deeper international foray in order to meet domestic demand. Since the last two years, CNOOC has been bidding billions of dollars in overseas properties to increase its yield. The latest deal marks a major step in the company’s goal to boost its output level by approximately 2.7% this year.
Strength of the Acquiree
Calgary, Alberta-based Nexen operates in western Canada, the Gulf of Mexico, North Sea, Africa and the Middle East, and has its biggest reserves in the Canadian oil sands. Apart from oil sands, Nexen remains dynamic in natural gas exploration in shale rock formations. It owns approximately 300,000 acres of shale-gas blocks in the Horn River Basin in British Columbia.
During the second quarter, Nexen’s production before royalties averaged 213 thousand barrels of oil equivalent per day/MBOE/d (207 MBOE/d net of royalties). Production before royalties increased 4.4% year over year, and on a net-of-royalty basis, it grew 15%. The company had 900 million barrels of oil equivalent (:MMBOE) of proved reserves and 1,122 MMBOE of probable reserves as of December 31, 2011.
Other Foreign Moves
Last year, CNOOC completed the C$2.1 billion acquisition of OPTI Canada Ltd and achieved stake in a Canadian oil sands company and a share in Long Lake project. Back in 2005, the company made its first Canadian investment in which it paid C$122 million ($120.8 million) for a 16.7% stake of the private oil sand developer MEG Energy Corp.
However, the Chinese energy companies have moved more carefully after CNOOC’s attempt to acquire U.S.-based exploration and production company Unocal for $18.5 billion was disappointed by a political backlash seven years back. The deal was rejected by U.S. lawmakers on fears of disturbing national security.
According to the International Energy Agency, CNOOC and other major state-owned Chinese energy companies made less than $2 billion worth of total acquisitions between 2002 and 2003. Notably, it jumped to nearly $48 billion in 2009 and 2010.
Rank & Recommendation
We maintain our long-term Neutral recommendation on CNOOC. Also, the company currently retains a Zacks #3 Rank (short-term Hold rating).
Earnings Preview: Tractor Supply
Tractor Supply Company (TSCO), a leading retail firm and ranch store brand, is scheduled to report its second-quarter 2012 financial results after the market closes on July 25, 2012. The current Zacks Consensus Estimate, for the quarter, is $1.39 per share and revenue is expected to be $1,302 million.
First-quarter 2012, a Synopsis
Tractor Supply's first-quarter 2012 earnings came in at 55 cents, surpassing the Zacks Consensus Estimate of 54 cents as well as the prior-year earnings of 24 cents per share.
Tractor Supply’s first-quarter results benefited mainly from the structural improvements made over the years. This enabled the company to adjust its offerings to suit customer demand and to promptly respond to events, such as the early onset of spring in March 2012.
During the recession, Tractor Supply had suffered setbacks as buyers avoided big-ticket purchases, such as mowers, but recent quarters have seen an uptick in results. The company’s impressive merchandising improvement strategy along with solid same-store sales trend resulted in double-digit top-line growth in revenues. Net sales in the quarter surged 22% to $1,020.4 million from $836.6 million in the prior-year quarter. Moreover, total revenue surpassed the Zacks Consensus Estimate of $1,002 million.
Guidance for 2012
Encouraged by strong first-quarter results, the company raised its 2012 earnings guidance range to $3.52 to $3.60 per share compared with its earlier forecast of $3.38 to $3.46 per share.
Moreover, net sales forecast for 2012 has also been raised to $4.61 – $4.68 billion versus the previous guidance of $4.56 – $4.66 billion. In 2012, same store sales are expected to register an increase of 4.0% to 5.5%, up from its prior forecast of 3% to 5%. Further, the company has planned to open 90 to 95 new stores during 2012.
The analyst covered by Zacks expects Tractor Supply to post second-quarter 2012 earnings of $1.39 a share, higher than $1.23 delivered in the prior-year quarter. Currently, the Zacks Consensus Estimate ranges between earnings of $1.33 and $1.46 a share.
For 2012, the Zacks Consensus Estimate stood at $3.68 per share, higher than its previous fiscal earnings of $3.01 per share. The current Zacks estimate ranges between $3.58 and $3.75 per share.
Estimate Revisions Trend
We do not see any major estimate revisions at this point. Among the 19 estimates, one estimate for the second quarter revised upward while one moved in the opposite direction in the last 30 days. In the last 7 days, one estimates moved downward while none moved in the opposite direction.
For full-year 2012, 1 out of 21 estimates was revised downward while none moved in the opposite direction in the last 7 and 30 days.
The Zacks Consensus Estimate for the upcoming quarter inched down by a penny over the last 30 days. Some of the analysts believe that the company’s second-quarter financial performance may disappoint due to drought and moderate consumer spending.
However, for 2012, most of the analysts remained constructive on the stock based on the company’s growth prospects and kept their estimates intact, in the absence of any major news having a direct or an indirect impact on the estimates.
With respect to earnings surprises, Tractor Supply has topped the Zacks Consensus Estimate over the last four quarters in the range of 1.9% to 11.5%. The average surprise over the last four quarter remained at positive 5.1%.
Tractor Supply is the largest operator of farm and ranch stores in the U.S., a unique market niche that serves the lifestyle needs of recreational farmers and ranchers. The company's stores are strategically located in small towns, close to its target customers, providing it with a competitive edge over its rivals.
We believe that Tractor Supply has successfully tweaked merchandise assortment across its stores, which is in line with the prolonged economic downturn. The company has increased the proportion of less discretionary items, such as animal and pet-related products, while reducing shelf space for certain big-ticket merchandise, such as outdoor power equipment.
Moreover, in an effort to boost margins, Tractor Supply is expanding its portfolio of private label brands and is also focusing on direct sourcing. The company has set a long-term target of generating 25% of sales from private label brands and 13% from strategic direct sourcing. This provides a strong upside potential to the company.
However, the company operates in a highly fragmented industry and faces intense competition from larger retailers, such as The Home Depot Inc. (HD) and Lowe’s Companies Inc. (LOW) as well as from independently-owned retail farm and ranch stores, privately-held regional farm store chains as well as cooperatives. Being in such a high competitive industry, Tractor Supply may find it difficult to execute and implement new business strategies, which in turn, may impact its operations adversely.
Currently, we are maintaining a long-term ‘Outperform’ recommendation on Tractor Supply. However, the company has Zacks #3 Rank implying a short-term Hold rating on the stock.
Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5515.
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.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leon Zacks. As a PhD from MIT 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 at http://at.zacks.com/?id=5518.
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/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
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.
Zacks Investment Research
800-767-3771 ext. 9339
More From Zacks.com
- Investment & Company Information
- Tractor Supply
- Tractor Supply Company
- Tractor Supply