The Zacks Analyst Blog Highlights: IBM, Hewlett-Packard, Intel, Marathon Oil and Marathon Petroleum

Zacks


For Immediate Release

Chicago, IL – October 17, 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 IBM Corp. (IBM), Hewlett-Packard (HPQ), Intel Corporation (INTC), Marathon Oil Corporation (MRO) and Marathon Petroleum Corporation (MPC).

 

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Here are highlights from Tuesday’s Analyst Blog:

IBM Misses, Shares Take a Hit

After the bell Tuesday, large-cap tech company and household name IBM Corp. (IBM) reported 3rd quarter 2012 earnings. The results seemed humdrum, but the reaction has been swift and severe: IBM shares have fallen roughly $7 per share in the after-market following its slight earnings miss and tepid guidance.

IBM reported quarterly earnings of $3.60 per share (discounting one-time items but including stock-based compensation), missing the Zacks Consensus Estimate of $3.62. Revenues also came in light at $24.7 billion versus the $25.4 billion expected. Further, IBM announced its full year 2012 guidance of "at least" $15.10 per share (non-GAAP), whereas the Zacks Consensus had this number pegged at $15.14 per share.

While Business Analytics and Smarter Planet revenues up 14% and 20% year to date, as expected, Systems & Technology overall revenue was down 13%. Downward currency adjustments took a chunk out of expected progress in Growth Markets, as well as overall Software sales, as IBM does a ton of business overseas.

At first blush, there doesn't seem much to propel shares downward so fast; IBM's game-plan seems intact (I'm sure Hewlett-Packard (HPQ) wishes it had IBM's sophisticated analytics and cloud-computing businesses right about now), and progress in its data and industry collaboration efforts in smart grids, green energy, etc. making up the Smarter Planet services is quite respectable for a company that just made computers not so long ago.

Then again, IBM had just hit a new 52-week high before the bell, so perhaps traders were looking for a good reason to take some air out of IBM's balloon. That said, these days if you're a big company with a solid record of earnings surprises, missing on both the top and bottom lines while also reiterating conservative guidance is going to get your stock hammered in the near term.

 

Intel Beats Lowered Q3 Expectations

Intel Corporation (INTC) is not fooling around when it mentions the tough economic environment. A few moments ago, the technology giant announced third-quarter revenue of $13.5 billion, which was above the company’s lowered guidance of $13.2 billion. However, that’s a very far cry from the original outlook of $13.8 billion to $14.8 billion. It was also down more than 5% from a year ago. The Zacks Consensus Estimate was at $13.17 billion.

The company lowered its guidance in early September citing a “weaker than expected demand in a challenging macroeconomic environment.” More specifically, the personal computer industry is in a major slump. As a result, Intel moved into the third quarter report with downward earnings estimate revisions. For example, in just the last 30 days, the company has witnessed 18 downward revisions out of 41 total estimates… with none to the upside.

The company is currently a Zacks #5 Rank (Strong Sell).

Earnings per share came in at 58 cents, which was ahead of the Zacks Consensus Estimate of 50 cents. However, beating quarterly expectations has never been a problem for Intel. The company has an impressive streak of outperformance stretching back years. Instead, it’s all about the guidance.

For the fourth quarter, Intel forecasts revenue of $13.6 billion, plus or minus $500 million. Therefore, the outlook is right around the Zacks Consensus Estimate of approximately $13.6 billion.

In and of itself, Intel is still the leader in its industry. The company said it is pleased with the progress in Ultrabooks and phones. It’s also excited about the range of Intel-based tablets coming out. However, the market is just not cooperating at the moment, which was even further underscored when main competitor Advanced Micro Devices recently warned.

We’ll have to wait and see how analysts will digest the new numbers, though Intel is unlikely to see a Zacks #3 Rank (Hold) or better for a while.

 

Marathon Continues Divesting Assets

Leading integrated oil and gas firm Marathon Oil Corporation (MRO) plans to sell majority of its acreage in Texas' Eagle Ford basin. The company aims to shed the non-core properties while reorganizing its portfolio following the spin-off of its refining division last year.

Marathon Oil holds 325,000 acres in Eagle Ford shale and will likely shed about 100,000 acres in Wilson, Karnes and Bee Counties. It could receive up to $25,000 an acre on sale of the said assets. Major portion of the land, which will be put up for sale, is located in Wilson County. The company plans to sell the acreage as there is no drilling activity in the region.

Over the next five years, management plans capital spending of $1.6 billion per year in the Eagle Ford. They also expect net production to be 120,000 barrels of oil equivalent per day by 2016.

Management opines that this sale will not affect the company’s plan or production target. Its oil and gas production in the Eagle Ford during the second quarter of 2012 rose 50% sequentially.

Earlier this month, Marathon Oil announced its plans to offload 80,000 acres in the Marcellus region in West Virginia and Pennsylvania.

Houston, Texas-based Marathon – which last year spun off its refining/sales business into a separate, independent and publicly traded company Marathon Petroleum Corporation (MPC) – retains a Zacks #3 Rank (short-term Hold rating). We are also maintaining our long-term Neutral recommendation on the stock.

Marathon is a leading energy firm with a large and geographically-diverse reserve base and solid project pipeline. Additionally, the company possesses a healthy balance sheet, which helps it to capitalize on investment opportunities. We also like the strong growth potential of Marathon’s high-margin liquids-rich unconventional plays, which diversify its portfolio and are expected to further drive its overall volumes.

While being incrementally more positive on the company, we believe Marathon will take some time to fully absorb the outcome of the spin-off. Consequently, we would rather wait for a better entry point before accumulating shares.

 

 

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Read the analyst report on IBM

Read the analyst report on HPQ

Read the analyst report on INTC

Read the analyst report on MRO

Read the analyst report on MPC

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