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The Zacks Analyst Blog Highlights: Valero Energy, ConocoPhillips, Hess, Marathon Oil and Conn's

Zacks Equity Research

For Immediate Release

Chicago, IL – April 9, 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 Valero Energy Corporation (VLO), ConocoPhillips (COP), Hess Corporation (HES), Marathon Oil Corporation (MRO) and Conn’s, Inc. (CONN).

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Here are highlights from Monday’s Analyst Blog:

Valero Spins Off Retail Unit

U.S. refining company Valero Energy Corporation (VLO) announced that it has received an approval from its board of directors with respect to the spin-off of its retail business, CST Brands, Inc.

The distribution of 80% of outstanding CST shares to Valero shareholders is expected to take place on May 1, 2013 in a tax-free transaction. The remaining 20% of CST will be held by Valero for six months, after which it will contemplate on farming-out based on market conditions.

Valero shareholders will receive one share of CST Brands common stock for every nine shares of Valero common stock held as of the record date of Apr 19, 2013. The fractional shares of CST Brands common stock will not be distributed. However, the distribution agent will aggregate fractional shares into whole shares and sell the whole shares in the open market at current rates.

The net cash proceeds will be distributed on a pro rata basis to each shareholder, who would otherwise have been entitled to receive fractional shares. Last year, Valero had proposed to search for alternatives for the gasoline and convenience stores it owns in the United States and Canada, including the spin-off of its retail unit.

Valero remains on track with its strategy of boosting its shareholders’ value, much like ConocoPhillips (COP), Hess Corporation (HES) and Marathon Oil Corporation (MRO).

Valero is the largest independent refiner and marketer of petroleum products in the U.S. It has a refining capacity of 2.8 million barrels per day across 14 refineries located throughout the U.S., Canada and the Caribbean. Valero is also a leading ethanol producer with 10 ethanol plants in the Midwest that have a combined capacity of 1.2 billion gallons per year. Valero organizes its business into three reportable segments — Refining, Ethanol and Retail.

Valero holds a Zacks Rank #3, which is equivalent to a short-term Hold rating.

Conn’s Upgraded to Strong Buy

On Apr 6, 2013, Zacks Investment Research upgraded Conn’s, Inc. (CONN) to a Zacks Rank #1 (Strong Buy). Shares of this specialty retailer of home appliances, furniture, mattresses and consumer electronics have amassed an impressive year-to-date return of 43.7%. 

Why the Upgrade?

Conn’s has been witnessing rising earnings estimates owing to impressive fourth-quarter fiscal 2013 results, on the back of strong comparable-store sales momentum, the pricing power, margin improvement and unit remodeling. The company declared strong results on Apr 3, 2013, wherein earnings of 54 cents a share came in line with the Zacks Consensus Estimate but surged 58.8% from 34 cents earned in the year-ago quarter.

This durable consumer goods retailer has outperformed the Zacks Consensus Estimate in 4 out of last 5 quarters and met in one, resulting in an average beat of 13.4%. The long-term expected earnings growth rate for the stock is 15%.

Conn’s total revenue grew 10.4% to $250.3 million in the quarter from $226.7 million in the year-ago period, and came ahead of the Zacks Consensus Estimate of $249 million. Comparable-store sales for the quarter climbed 7%.                                   

Revenue from the retail segment increased 9.7% to $208.7 million, whereas retail gross margin expanded 720 basis points to 36.9%. On the other hand, credit card segment revenue soared 14.5% to $41.6 million.

Buoyed by healthy results, management now projects fiscal 2014 earnings between $2.40 and $2.50 with expected comparable-store sales growth of 3% to 8%.

The Zacks Consensus Estimates for the first and second quarters of fiscal 2014 rose 11.9% and 8.2% to 47 cents and 53 cents, respectively, in the last 7 days. For fiscal 2014, the Zacks Consensus Estimate rose 17.8% to $2.45 per share over the same time frame.

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Read the analyst report on VLO

Read the analyst report on COP

Read the analyst report on HES

Read the analyst report on MRO

Read the analyst report on CONN

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