July 12, 2011

The Zacks Analyst Blog Highlights: Alcoa, ConocoPhillips, BP Plc, ExxonMobil and Chevron

CHICAGO, July 12, 2011 /PRNewswire/ -- 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: Alcoa Inc (NYSE: AA), ConocoPhillips (NYSE: COP), BP Plc (NYSE: BP), ExxonMobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX).

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Here are highlights from Monday's Analyst Blog:

Alcoa Leads Off With Mixed Results

Alcoa Inc (NYSE: AA) officially kicked off another earnings season on Monday with mixed second-quarter results. Revenue came in better than expected, but earnings per share were short for the first time in five quarters.

The company reported adjusted earnings per share of 32 cents, missing the Zacks Consensus Estimate of 34 cents. Earnings estimates had been falling heading into the number, and the stock was downgraded to a Zacks #4 Rank (Sell) on July 7.

Revenue for the quarter rose 27% to $6.585 billion, above the Zacks Consensus Estimate of $6.434 billion. The increase was due in part to higher alumina shipments, and higher realized pricing for both alumina and aluminum.

Revenue growth was strong in many of Alcoa's end markets. Commercial transportation rose 13% while packaging increased 13%. Building and construction was up a solid 12% while industrial products increased 9%. Aerospace saw a 6% rise in revenue.

Meanwhile, the gross profit margin expanded year-over-year from 18.8% of revenue to 20.3%. It fell, however, from 20.9% in the first quarter.

CEO Klaus Kleinfeld remained positive on the company's outlook, stating that "[d]emand for aluminum continues to rise and so does growth in our major markets. These factors support our projection that aluminum demand will grow 12 percent this year and will double by 2020."

Alcoa Inc. is the world's leading producer and manager of primary aluminum, fabricated aluminum and alumina facilities, and is active in all major aspects of the industry.

Shares rose slightly in afterhours trading.

ConocoPhillips to Shed Vietnam Assets

ConocoPhillips (NYSE: COP) intends to divest its $1.5 billion worth of Vietnam assets in the contentious South China Sea to Petrovietnam and partners.

This is reflective of the U.S. oil company's effort to categorize its asset base and sustain its growth trajectory.

In a complex of five oilfields in Block 15-1, ConocoPhillips holds a 23.3% interest. Its partners, the state-run Vietnam oil and gas group Petrovietnam, Korea National Oil Corp stake, Korea's SK Corp and Monaco's Geopetrol hold a 50%, 14.2%, 9% and 3.5% interest, respectively.

In Block 15-2, ConocoPhillips enjoys a 36% stake of the Rang Dong oilfield in the Cuu Long basin with the other partners being Japan Vietnam Petroleum Co with a 46.5% stake and Petrovietnam with 17.5%.

In the Nam Con Son gas pipeline project, the U.S. integrate owns a 16.3% share along with its co-partners BP Plc (NYSE: BP) with 32.7% and Petrovietnam with 17.5% interests.

The expected divestiture plan is a part of the company's restructuring program, under which it aims to exit countries in which it has a small presence. The area in the South China Sea remains loaded with hydrocarbon deposits and is under dispute involving China, the Philippines and Vietnam over proprietary rights. Vietnam and the Philippines have charged China with increasing conflict in the area by disturbing seismic cables on oil and gas exploration ships, threatening to damage vessels and injuring fishermen.

As the third-largest U.S. oil company by market value after ExxonMobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX), ConocoPhillips' latest asset sale decision might reflect the technical or political complexities over the oil fields, which are located 180 kilometers southeast of Ho Chi Minh City.

However, on Petrovietnam's part, this acquisition plan demonstrates a commitment to help protect Vietnam's sovereignty in the East Sea, as it calls the disputed area. PetroVietnam stated that it will not change its exploration and production plan in the East Sea.

We appreciate ConocoPhillips' emphasis on creating shareholder value through operational excellence, strong project execution, dividend payout and utilization of its excess cash flow to repurchase shares. Further, strong proceeds from asset sales, disposal of low-profit generating properties and cancelation of potentially less profitable projects adds to the company's attempt to sustain its growth trajectory.

We maintain our long-term Neutral recommendation for the company, which retains a Zacks #3 Rank (short-term Hold rating).

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