For Immediate Release
Chicago, IL – May 15, 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 Chesapeake Energy (CHK), Range Resources (RRC), ConocoPhillips (COP), Green Mountain Coffee Roasters (GMCR) and Starbucks (SBUX).
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Here are highlights from Monday’s Analyst Blog:
Chesapeake Defers Divestment Plans
Oklahoma-based oil and gas producer Chesapeake Energy Corporation (CHK) has postponed its planned asset sale to ensure that terms and conditions set forth by its creditors are not jeopardized.
Per the Fitch Ratings estimate, Chesapeake faces a funding gap of $10 billion in 2012. In order to reduce its debt, the company had planned to raise about $14 billion by divesting its assets and through further deals.
But Chesapeake reasoned that while the monetization of its assets would ease its funding problems, it would, at the same time, decrease its cash flow and the worth of security used to back its debt.
Thus, in compliance of its credit facility, the company plans to delay its assets sale or choose some other asset for divestment. As Chesapeake anticipates expenses on its wells and assets to be around $23.1 billion in 2012 and 2013, it plans to fund the majority of this expense through asset monetization.
The massive fall in natural gas prices in 2011 has created a huge funding gap for Chesapeake. To overcome this problem, Chesapeake like Range Resources Corporation (RRC) and ConocoPhillips (COP) is constantly making efforts to shift to oil production from gas.
Chesapeake had initiated a 25/25 plan to reduce its long-term debt (through monetizing its assets and a reducing in lease-hold spending) by 25%, while increasing its natural gas and oil production by the same percentage for 2012.
Per the Zacks Consensus, Chesapeake’s earnings per share for the year 2012 and 2013 are estimated at $0.75 and $1.92, respectively. This represents a decline of 73.2% in 2012 and a growth of 155.5% in 2013.
Chesapeake holds a Zacks #5 Rank, which is equivalent to a Strong Sell rating for a period of one to three months. Longer term, we maintain our Neutral recommendation on the stock.
Change on Green Mountain’s Board
Green Mountain Coffee Roasters Inc. (GMCR) recently removed two senior members from their positions in the Board of Directors due to the violation of internal policies.
Robert Stiller, the company’s founder and chairman, along with lead director William Davis were removed from their respective positions. These board members were sacked after they sold their shares for margin calls when the trading window was closed as per the company’s internal trading policy.
According to the company, Stiller sold 5 million shares to cover margin calls and William Davis sold 4,00,000 shares on May 4, 2012, and another 148,000 on May 7, 2012 when the trading window was closed due to the company’s internal trading policy.
Following the reorganization of the management, the company has now appointed Michael J. Mardy, who was formerly the head of the board’s audit and finance committee, as interim chairman.
Robert P. Stiller founded Green Mountain in 1981 and served as its President and Chief Executive Officer until May 2007, after which he was the company’s Chairman of the Board of Directors until May 2012.
William D. Davis was the President and Chief Executive Officer, and a Director from July 2002 until September 2010.
After the sell-off, Stiller holds 1,857,031 million shares, and Davis holds 36,598 shares of Green Mountain stock.
Green Mountain Coffee Roasters is a growing company in an industry that is expanding fast. The premium coffee industry has experienced strong growth over the past decade and the company is targeting the growing consumer demand for the coffee experience.
Moreover, management’s core business model involves the implementation of a multi-channel geographic penetration strategy, which entails expanding distribution through multiple channels and through geographic expansion. The use of multiple distribution channels increases the presence of the company’s coffees.
However, Green Mountain revenue is highly dependent on one-cup Keurig brew systems and the coffee K-Cup packages that go in them. However, eventually when the demand for brew systems will slow down and the explosive growth seen in 2011 will cease.
Moreover, the main patents on the K-Cup will end in September of 2012. Well-known brands and close competitors like Starbucks (SBUX) will have other alternatives, which would hurt the company’s fundamentals.
Currently, Green Mountain holds a Zacks #4 Rank, which translates into a short-term Sell rating. Over the long term, we prefer to rate the stock as Neutral.
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