Zacks Bull and Bear of the Day Highlights: Embraer S.A. – ADS, Ferrellgas Partners, Halliburton, Baker Hughes and Diamond Offshore
CHICAGO, June 9, 2011 /PRNewswire/ — Zacks Equity Research highlights: Embraer S.A. – ADS (NYSE: ERJ) as the Bull of the Day and Ferrellgas Partners (NYSE: FGP), as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Halliburton (NYSE: HAL), Baker Hughes (NYSE: BHI) and Diamond Offshore (NYSE: DO).
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Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Embraer S.A. – ADS (NYSE: ERJ) posted strong results in the first quarter of fiscal 2011 with EPADS of $0.58, surpassing the Zacks Consensus Estimate of $0.34. The company’s higher sales, improved margins, strong firm order backlog and solid cash management strategy appear encouraging.
Moreover, Embraer’s expansion in China, Central Asia, Europe, Middle East and Africa as well as its diversification into government security and defense mechanism along with the corporate jets are expected to bring in steady growth going forward. Hence, we upgraded the stock to an Outperform recommendation.
Our long-term Outperform recommendation on the stock indicates that it would outperform the broader U.S. equity market. Our $37.00 target price, 17.5x 2011 EPADS reflects this view.
Ferrellgas Partners (NYSE: FGP), since the beginning of fiscal 2011, has already made four acquisitions. However, the partnership’s results in the second quarter continued the past trend of poor earnings.
Moreover, we believe the absence of distribution growth for more than a decade has led the partnership to trade at a discount to its propane peers. We do not see any catalyst to change this situation in the near-term, which should affect the unit price going forward.
We also see increased competition for Ferrellgas from within and outside the industry. Thus, we have an Underperform recommendation on the stock.
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World, U.S. Oil Production Rises in 2010
The simple fact is that the world is running out of cheap, easily accessible oil. That is why oil companies have been going to the ends of the earth to find more of it. It is the reason why they have to drill in more than a mile of water or locate in more and more politically unstable parts of the world.
Oil is, after all, a non-renewable resource. Once you have drained the oil from a nice, safe, easily accessible place like West Texas, it is gone, and gone for good. Oil consumption and production fell in 2009 relative to 2008 in response to the worldwide economic downturn, and the increases in 2010 are due to the economic rebound around the world.
Consumption growth, both short term and longer term, is being driven by the emerging economies, especially China and India. While not as big in absolute terms, in percentage terms the increase in consumption among the oil producing countries is just as big.
As oil becomes harder and harder to find and develop it also requires more work from the Oil Service firms. This puts a nice long-term tailwind at the back of companies like Halliburton (NYSE: HAL) and Baker Hughes (NYSE: BHI). With more and more oil production moving into deeper and deeper waters, the drilling firms that specialize in deepwater such as Diamond Offshore (NYSE: DO) are very well positioned.
This is highly significant, since ultimately for the U.S. what matters is not just world oil production, but how much of that production is a available for export. Any country, regardless of how democratic or despotic its leadership, is going to first prioritize the energy needs of its own people before the energy needs of the rest of the world. That is particularly true if they are not being forced economically to export every spare drop.
Most of the oil-exporting nations of the world are either poor or middle income. In such countries, the link between increases in incomes and increases in oil use are very strong. People are going to want to move up the transportation scale from bicycles to motor bikes to cars as they start to get a little bit more money. In those countries, new auto sales generally represent an addition to the overall auto fleet of that country.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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