For Immediate Release
Chicago, IL – September 26, 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 Leap Wireless International Inc. (LEAP), Verizon Communication Inc. (VZ), AT&T Inc. (T), Royal Dutch Shell plc (RDS.A) and Quicksilver Resources Inc. (KWK).
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Here are highlights from Tuesday’s Analyst Blog:
Moody’s Upgrades Leap’s Outlook
Rating agency, Moody’s Investor service has upgraded its outlook on Leap Wireless International Inc. (LEAP) from negative to stable on the back of the prepaid carrier's plan to trim down its debt.
Leap Wireless’s wholly-owned subsidiary Cricket Communications Inc. has announced that it has arranged a term loan facility of $400 million to pay back its existing 10% senior notes of $300 million due on 2015, this is attributable for the raised outlook. The remaining proceeds from the loan will be used for general corporate purposes.
Recently, Leap Wireless declared dismal second-quarter 2012 results, wherein both revenue and EPS fell short of the Zacks Consensus Estimates. The slump in quarterly result was buoyed by increased churn rate. Leap currently holds Moody’s B2 rating, which is five notches above the junk category.
To transcend this tough situation, the company is trying to reduce its operating costs other than considering asset sale options. The company has declared to reduce its capital spending by 13% for 2012. We believe controlled capital spending coupled with the debt reduction effort will help the company to improve operation, which in turn will help the company to improve its cash flow situations.
The pay-as-you-go carrier has vowed to offer the latest iPhone 5 from September 25, 2012. It will be the first company to launch prepaid iphone5 and will be mainly targeting the young customers. Though it faces stiff competition from the likes of Verizon Communication Inc. (VZ) and AT&T Inc. (T), we believe its lower tariff plan will mainly attract the low-end customers of these national carriers. However, if the company’s strategic initiative fails to deliver it could face further cut in ratings from Moody’s.
The current Zacks Consensus Estimate for Leap Wireless International Inc. is pegged at ($0.76) for the third quarter of 2012 with a growth rate estimate of 15.33%. For 2012, the Zacks Consensus Estimate stands at ($3.84) with a growth rate of 6.49% while for 2013, the Zacks Consensus Estimate stands at ($3.11) with a growth rate of 19.12%.
We retain our long-term Neutral recommendation on Leap Wireless Inc. Currently, it has a Zacks #3 Rank, implying a short-term Hold rating.
Shell in Asset Development Deal
Royal Dutch Shell plc (RDS.A) – through its affiliate SWEPI LP – entered into an asset development agreement with Fort Worth, Texas-based Quicksilver Resources Inc. (KWK).
Per the terms of the joint venture signed between the two aforesaid companies, they will be involved in developing their oil and gas holdings spanning across the Sand Wash Basin in Northwest Colorado. The companies are expected to cover more than 850,000 acres in the basin and set up an Area of Mutual Interest ("AMI").
Each company will transfer 50% of its working interest in the majority of their acreage in the Sand Wash Basin to the other party. This will also endow each company with the right to 50% stake in any acquisition within the AMI.
Quicksilver will also be paid an undisclosed compensatory amount from SWEPI for its large share in acreage contribution compared to Shell.
SWEPI, subject to agreement, will likely act as the operator for most of the property, while Quicksilver will continue operating wells drilled prior to the agreement along with other assigned lands.
The deal – awaiting customary rules and conditions, is expected to be closed by the end of 2012.
The Hague-based Royal Dutch Shell owns one of the largest integrated oil and gas businesses in the world. Shell, currently retains a Zacks #3 Rank that translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.
We believe that Shell owns a strong and diversified portfolio of global energy businesses that offer attractive long-term growth opportunities. The group’s strong inventory of development projects and increased capital expenditures should facilitate volume growth over the long haul.
However, the company is particularly susceptible to its high exposure to the downstream business, its major natural gas focus, as well as lofty capital spending, which may result in reduced returns going forward.
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