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The Zacks Analyst Blog Highlights: Tesoro, Chevron, BP, Ferrellgas Partners and Rite Aid

Zacks Equity Research

For Immediate Release

Chicago, IL – June 20, 2013 – 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 Tesoro Corporation (TSO-Free Report), Chevron Corporation (CVX-Free Report), BP plc (BP-Free Report), Ferrellgas Partners LP (FGP-Free Report) and Rite Aid Corporation (RAD-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Wednesday’s Analyst Blog:

Tesoro Gets FTC Nod, Under Condition

The Federal Trade Commission (FTC) has permitted Tesoro Corporation (TSO-Free Report), an independent refiner, to acquire Northwest Products system from the U.S. energy giant Chevron Corporation (CVX-Free Report). However, the U.S. antitrust regulators have imposed a condition.

Per the authorization, Tesoro can buy the 760 miles of Northwest Products Pipeline system and some terminals if it divests a Boise, Idaho-based petroleum terminal within six months.

In December last year, Tesoro inked a contract with Chevron to buy the pipeline assets for a total consideration of $400 million. However, later on the price was fixed at $355 million after negotiations. Following the closure of the deal, Tesoro will own two out of the three terminals in Boise. According to FTC, this will allow Tesoro to gain tremendous market dominance there, which requires it to divest one of the two Idaho facilities.

Last month, Tesoro got the consent of FTC to acquire southern California-based refining business of oil major – BP plc (BP
-Free Report) – for a total consideration of $2.5 billion. However, Tesoro was not required to divest any property for that deal.

San Antonio, Texas-based Tesoro operates in two segments: Refining and Retail. The company is involved in a number of high-return projects that are expected to be cost effective. These projects will not only boost Tesoro’s competitive position among its peer group but will also provide significant earnings and cash flow growth visibility.  

However, in terms of geographic diversification, Tesoro’s lack of exposure to the other refining regions in the country weakens its competitive positioning. The company’s West Coast operations and heavy dependence on the weak Californian market act as major liabilities.

Tesoro currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next 1 to 3 months.

Meanwhile, one can look at Ferrellgas Partners LP (FGP
-Free Report), as a good buying option. The energy stock – sporting a Zacks Rank #1 (Strong Buy) – has solid secular growth stories with the potential to rise significantly from the current levels.

Rite Aid Ups Debt Offering Amount

Rite Aid Corporation (RAD-Free Report) raised the offering of senior notes to $810 million. Earlier, this week, the company had announced its intention to offer $400 million senior notes maturing in 2021.

This is the second time in June that Rite Aid is implementing a refinancing scheme. The new senior notes will carry a coupon rate of 6.75% and mature in 2021. The offering is expected to close on Jul 2, 2013.

The company plans to use the proceeds from this offering, along with its existing cash and borrowings to redeem an equivalent amount of senior notes bearing an interest rate of 9.5% due in 2017.

The company informed this separately by revealing its cash tender offer to buy all of its outstanding $810 million worth of senior notes carrying a coupon rate of 9.5% that will mature in 2017. As part of the offer, the company is also seeking consent for amendments in the senior notes. Unless extended or terminated earlier, the particular offer will expire at midnight on Jul 16, 2013.

As per the company’s previous announcement, the fees, expenses and charges related to the refinancing transactions will weigh upon its financial results – including net income, earnings per share and guidance.

At the end of fiscal 2013, this Zacks Rank #2 (Buy) company had $665.0 million borrowing outstanding under its senior credit facility and $115 million of outstanding letters of credit.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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