The Zacks Analyst Blog Highlights: Visa, Mastercard, Bank of America, BP and Exxon Mobil

Zacks

For Immediate Release
 
Chicago, IL – April 08, 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 Visa Inc. (V-Free Report), Mastercard Inc. (MA-Free Report), Bank of America (BAC-Free Report), BP plc (BP-Free Report) and Exxon Mobil Corp. (XOM-Free Report).
 
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Here are highlights from Monday’s Analyst Blog:

Key Stocks in Russia-Ukraine Crisis

The Ukraine crisis followed by the standoff between Russia and the West is definitely far from resolved. The annexation of Crimea last month by Russia has not yet settled nerves; there are more troubles down the road expected.

In recent days, Russia has twice hiked the price for natural gas to Ukraine. The Transdniester region may be the next target of Russia and the NATO chief is alarmed that Russia may be set to move on Ukraine.

Thus, for investors, it is important to know the whereabouts of our holdings that have Russian exposure. The economic and political developments have led to company-specific events, too. For instance, Russia decided to have their own domestic payment system within six months after the U.S. sanctions on Russia led to the suspension of credit purchase payment services by Visa Inc. (V-Free Report) and Mastercard Inc. (MA-Free Report) in some of their approved banks in Russia.  

Flagging Confidence, Escalating Concerns

Volatility cannot be ruled out. The Bank of America (BAC-Free Report) Merrill Lynch fund Manager Survey stated that a lion’s share of investors expressed concern over the geopolitical tensions being a threat to financial stability.

An exclusive Reuters report last month noted that the attorneys with the U.S. Securities and Exchange Commission were contacting investment companies that have investments in Russia. The U.S. markets have had a mixed impact so far, with investors escaping to safe-havens on certain days.  
 
Russia’s Economic Impact

Russia’s MICEX Index has slumped about 8% since mid-Feb with much of the downward move intensifying since Feb 28. Parliament building in Simferopol, regional capital of Crimea, was seized by pro-Russian forces on Feb 27. Speaking at a news conference on Feb 28, deposed president Viktor Yanukovych said he did not want a Russian military intervention in Ukraine. However, he retreated from this position the very next day, formally writing to President Putin requesting military intervention.

Fitch had chopped Russia’s rating outlook to negative from stable. Also, Standard & Poor’s has a negative outlook on Russia now and has a BBB rank. The Russian ruble has tanked about 7% so far this year.

Russia Continues Intensifying Fears

As the West condemned the violation of Ukrainian sovereignty and territorial integrity, Russia is continuing its tryst with intensifying political tensions. Germany’s finance minister Wolfgang Schauble compared Russia’s movements to be at par with that of Adolf Hitler. However, German Chancellor Angela Merkel played down those comments and had reportedly had discussions with Putin.

Russian Troops Not Withdrawn

Merkel’s spokesperson commented: “The Russian president informed the chancellor about the partial withdrawal of Russian troops.” The comment was then supported by media reports. However, NATO Secretary General Anders Fogh Rasmussen said that NATO has not noticed any pullout so far from the border.

In a more threatening development, NATO's supreme allied commander Europe General Philip Breedlove said Russian troops may move on Ukraine soon after getting orders. He told CNN that 40,000 troops are waiting at the border for the order and “It’s my opinion that they could move within 12 hours of a go,” said General Breedlove.  

Reportedly, Russia has now called back Col. Gen. Valery Yevnevich, the country’s ambassador to NATO.

Also, Russia's Federal Security Service (:FSB) has detained 25 Ukrainians, charging them of planning terror activities during the Crimean referendum.

Transdniester May Be the Next Target

There are escalating fears of Transdniester, a separatist region in Moldova, being the next target of Russia.  The government of this region is unrecognized by any country. A 2004 consensus notes that almost one-third of the 550,000 Transdniesters are Russians. Incidentally, some officials from Transdniester are in favor of Russia repeating the annexation act with this region.
 
Gas Price Hiked by 80%

Russia’s state-controlled gas exporter Gazprom hiked the price for natural gas to Ukraine twice last week. The first hike by 40% had taken the price to $385.5 per 1,000 cubic meters of gas. Now, the price is set at $485 per 1,000 cubic meters, reflecting a total 80% hike. What bothers Europe is that 30% of Europe’s gas is supplied by Russia. Of this, reportedly 80% comes via the pipelines spread through Ukraine.

US Secretary of State John Kerry has urged that energy “should not be used as a weapon.”  However, Kerry offered hope when he commented: “Our new capacities as a gas producer and the approval of seven export licenses is going to help supply gas to global markets, and we look forward to doing that starting in 2015.” European Union and United States officials will now work for diversifying Europe’s energy supply.

Corporations to Pull Back Operations?

Senator John McCain stated last week some of the big corporations must suspend their Russian operation. He told Bloomberg Television: “If we declare sanctions of a certain kind with their companies and corporations, obviously it would inhibit their way to do business, their ability to do business there… We don't want to hurt our own economy.” Secretary of State John Kerry had also warned that industrialized countries including the U.S. may “isolate Russia economically.”

Energy Sector

However, we note it is not easy to do so. Talking of the changing dynamics in the European energy sector, BP plc (BP-Free Report) is a company under focus. It is among the biggest foreign investors in Russia’s oil industry.

BP's total production in Russia in 2013 was a staggering 961,000 barrels of oil equivalents per day. BP holds 14.3 billion barrels of reserves and 48 billion barrels of offshore resource potential in Russia. Moreover, BP holds 20% ownership of Russian oil firm Rosneft.

Rolling back of operations will not be easy for BP. In fact, in its 2014 Investor Update, BP spoke of Russia playing a vital role in shaping its future. The company believes there is a significant long-term opportunity in Russia. However, things have changed a great deal over the past few weeks. Possible sanctions on Russia’s energy sector will further change the scenario.

BP announced recently the appointment of former TNK-BP senior manager David Campbell as the BP Russia’s president.

Another name to follow closely here is Exxon Mobil Corp. (XOM-Free Report). ExxonMobil and Russian state controlled Rosneft had worked together on an approximately $500 billion deal to explore an oil field in Western Siberia. Exxon has been planning to construct a LNG terminal project in the oil field worth $15 billion. In fact, it also has joint venture projects to explore the Black Sea reserves.

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