Copyright ©​ Daniel Cullinane CPA.

ANALYSTS VIEW

EVENTS

OIL UP

The natural gas rig count also rose by two to come in at 184 this week. The count for natural gas rigs is now up by one year over year. Natural gas for October delivery traded up about 1.5% at around $2.92 per million BTUs, about flat compared to last Friday and up about 0.4% for the week.Increasing trade tensions weighed on crude oil prices Friday, but black gold looked set to post a second consecutive weekly gain. WTI posted a gain of around 6% in the week ended August 24. The U.S. Energy Information Administration today released its monthly crude oil and natural gas report for June. U.S. production totaled 10.67 million barrels a day in June, up from 10.44 million barrels in May and 9.07 million barrels in June of last year. Natural gas production dipped less than 1% month over month but remains 10% higher than year-ago production of 89.4 billion cubic feet.Among the states, Baker Hughes reports that Kansas, Louisiana and Pennsylvania added one rig each this week. New Mexico and Oklahoma each lost one rig.In the Permian Basin of west Texas and southeastern New Mexico, the rig count now stands at 486, one more compared with the previous week’s count. The Eagle Ford Basin in south Texas has 78 rigs in operation, down week over week by one, and the Williston Basin (Bakken) in North Dakota and Montana has 52 working rigs, unchanged for the week.
Producers lost two horizontal rigs this week, and the count fell to 917, while offshore drillers reported a total of 16 rigs, unchanged compared with the previous week’s count

​RIG COUNT UP

​Even though we saw an almost 15% decline in the spot price of oil this summer, autumn may be destined to be a far different story. After the first tranche of the sanctions against Iran began on August 6, another big round will be imposed on November 4, and that round will include many of the items that deal with the country’s oil production and sales. While some countries may continue to try to buy oil from Iran, there is still expected to be a major drop in supply.

Iranian oil sales to customers already has plummeted as the buyers weigh the consequences of buying oil from the country. In fact, Iran’s oil exports have fallen by more than 500,000 barrels per day.

With the potential for a big spike in the fall, one that could shoot the price back in the $75 range or higher, it makes sense to add some of the top companies now. We screened the Merrill Lynch energy research universe for stocks rated Buy that paid at least a 4%. We found four that look very solid now.

Enterprise Products Partners

This is a leading North American provider of midstream energy services to producers and consumers. Enterprise Products Partners L.P. (NYSE: EPD) is the largest publicly traded master limited partnership (MLP), and its midstream energy services include gathering, processing, transportation and storage of natural gas, natural gas liquids fractionation, import and export terminaling, and offshore production platform services.

One reason why many analysts may like the stock might be its distribution coverage ratio. That ratio is well above one-times, making it relatively less risky among its peers. The company’s distributions have grown for several quarters, and last year Enterprise Products announced that the board of directors of its general partner declared an increase in the quarterly cash distribution paid to partners to $0.43 per common unit, or $1.72 per unit on an annualized basis.

Enterprise Products Partners investors are paid a very solid 5.86% distribution. The Merrill Lynch price target for the shares is $31, and the Wall Street consensus price target is $33.38. Shares were trading early Thursday at $29.30.

Exxon Mobil

This remains a top energy pick and is on the US 1 list at Merrill Lynch. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.

The company also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.

Exxon reported quarterly profits that fell short of analysts’ expectations, marking the fourth time in the past five periods the company has disappointed. The miss was largely due to weaker earnings in Exxon’s refining and marketing segment due to heavier-than-anticipated maintenance and operational problems. Exxon’s business producing oil and gas bolstered earnings, with the company saying it is favoring oil output over gas drilling in its U.S. shale fields.

Exxon investors are paid a very solid 4.10% dividend. Merrill Lynch has a price objective of $110, while the consensus target is $88.88. The shares traded on Thursday at $79.65 apiece.


​Royal Dutch Shell

This company has survived the seesaw in oil pricing as good as or better than any other major integrated. Royal Dutch Shell PLC (NYSE: RDS-A) operates as an independent oil and gas company worldwide through its Upstream and Downstream segments. The company explores for and extracts crude oil, natural gas and natural gas liquids.

Royal Dutch Shell also converts natural gas to liquids to provide fuels and other products; markets and trades crude oil and natural gas; transports oil; liquefies and transports gas; extracts bitumen from mined oil sands and converts it to synthetic crude oil; and generates electricity from wind energy.

In addition, the company engages in the conversion of crude oil into a range of refined products, including gasoline, diesel, heating oil, aviation fuel, marine fuel, liquefied natural gas for transport, lubricants, bitumen and sulphur; production and sale of petrochemicals for industrial customers; refining; trading and supply; pipelines and marketing; and alternative energy businesses.

Royal Dutch Shell recently announced the start of a $25 billion stock buyback program, and while second-quarter earnings were somewhat weak, free cash flow at the integrated giant remains strong.

Investors receive a huge 4.91% dividend. The $78 Merrill Lynch price objective is less than the $81.01 consensus figure. The stock traded at $65.15 Thursday morning.24/7 Wall St.
Merrill Lynch Makes Huge Late Summer Changes to US 1 Stock List

Williams Companies

This recently was added to the Merrill Lynch US 1 list of top stocks to buy. Williams Companies Inc. (NYSE: WMB) is now largely a pure-play domestic natural gas infrastructure company that has a 74% ownership interest in its underlying master limited partnership, Williams Partners.

The company has a lower risk, fee-based business model with some volume sensitivity. Natural gas demand continues to be driven by liquefied natural gas exports, power generation and industrials. In addition to steady demand growth, Marcellus production and associated gas in the Permian are expected to continue to be primary supply drivers.

Shareholders are paid a 4.46% dividend. The Merrill Lynch price target is $38. The consensus target is $34.22, and the shares traded at $30.25 apiece.

​The United States and Mexico reached a new trade deal. According to Reuters:

The United States and Mexico agreed on Monday to overhaul the North American Free Trade Agreement (NAFTA), putting pressure on Canada to agree to new terms on auto trade and dispute settlement rules to remain part of the three-nation pact.

Auto stocks soared and the S&P 500 and the Nasdaq rallied to record highs on the expectation that Canada would sign onto the deal and ease the economic uncertainty caused by U.S. President Donald Trump’s repeated threats to ditch the 1994 accord.

The United States will pay farmers hurt by the trade war. According to The Wall Street Journal:

The Trump administration pledged to pay farmers $4.7 billion to offset losses from trade disputes with foreign buyers of U.S. agricultural products.

Agriculture Secretary Sonny Perdue said the payments would help protect farmers from “unjustified tariffs” some nations have applied in response to President Trump’s trade policies. China, Mexico, the European Union and other trade partners have levied tariffs on U.S. farm goods from soybeans to pork to apples, leaving growers vulnerable during a downturn in the agricultural economy.


Toyota Motors Corp. (NYSE: TM) has set an autonomous car deal with Uber. According to The Wall Street Journal:

Toyota Motor Corp. is investing about $500 million in Uber Technologies Inc. as part of an agreement by the companies to work jointly on autonomous vehicles aimed at improving safety and lowering transportation costs.

Toyota’s investment values Uber at about $72 billion, slightly higher than where SoftBank Group Corp. valued the ride-hailing company earlier this year with its funding, according to people familiar with the matter.

Warren Buffett will invest in a mobile payment company based in India. According to The Wall Street Journal:

Warren Buffett’s Berkshire Hathaway Inc. is getting into the mobile-payments business.

The Omaha, Neb., conglomerate said Monday it invested in One97 Communications Ltd., the parent company of Paytm. The Noida, India-based company is India’s largest mobile-payments firm. It makes a popular smartphone app that can be used to pay for everything from movie tickets to auto-rickshaw rides

The Nasdaq rose above 8,000. According to The Wall Street Journal:

The Nasdaq Composite index vaulted above 8000 for the first time Monday, underscoring the dominant role megacap technology shares have played in propelling the U.S. stock market past its global peers this year.

It took the index just short of eight months to climb a thousand points after crossing 7000 in January—a pace unmatched since around the height of the dot-com era, when the Nasdaq jumped from 4000 to 5000 in just 49 trading days

A judge blocked the distribution of 3D gun instructions. According to The New York Times:

Cody Wilson, the self-described crypto-anarchist who has tried for years to post blueprints for 3-D printed guns online, will have to keep waiting, a federal judge ruled on Monday.

The judge ruled in favor of attorneys general from 19 states and Washington, D.C., who contend that 3-D printed guns are difficult to detect and trace, and constitute a threat to national safety. The ruling extends a temporary restraining order issued July 31, and means Mr. Wilson cannot publish the blueprints unless the attorneys general’s lawsuit is resolved.

​Stocks were indicated to open higher on Monday. Despite the S&P 500 hitting all-time highs a week ago, trading has been very mixed during a very strong earnings season. Investors have seen less reward in 2018 after buying every market dip than had been seen in the past few years. Now investors are deciding how they want their investments positioned ahead of the midterm elections and during international trade concerns.

24/7 Wall St. reviews dozens of analyst research reports each day of the week. The goal is to find new investing and trading ideas for our readers. Some of the daily analyst reports cover stocks to buy, and some reports cover stocks to sell or to avoid.

Additional commentary has been added on most of the daily analyst reports, along with trading history. The consensus analyst price targets and other valuation metrics are from the Thomson Reuters sell-side research service.

These are the top analyst upgrades, downgrades and initiations seen from Monday, August 27, 2018.

AK Steel Holding Corp. (NYSE: AKS) was raised to Overweight from Equal Weight but the price target was cut to $5.50 from $6.00 (versus a $4.29 prior close) at Morgan Stanley. The shares were indicated up over 2% at $4.38 on Monday.

American Eagle Outfitters Inc. (NYSE: AEO) was downgraded to Neutral from Outperform with a $29 price target (versus a $28.42 close) at Wedbush Securities.

Bloom Energy Corp. (NYSE: BE) was downgraded to Underperform from Neutral with a $24 price target (versus a $30.35 close) at Credit Suisse. The shares had closed up 5.5% on Friday, but they were indicated to open down about 4% at $29.60 on Monday.

Chipotle Mexican Grill Inc. (NYSE: CMG) was downgraded to Underperform from Neutral and the price target was cut to $445 from $450 (versus a $520.71 close) at Wedbush. The firm noted that its quarter-to-date checks suggest risk to the current third-quarter consensus same-store sales growth and margin expectations.

CIT Group Inc. (NYSE: CIT) was downgraded to Equal Weight from Overweight with a $60 target price (versus a $54.76 close) at Stephens. The stock has a 52-week range of $43.25 to $56.14 and a consensus target price of $56.77.

Cushman & Wakefield PLC (NYSE: CWK) has seen its quiet period come to an end. Shares closed up 0.6% at $17.65 on Friday, and the indications were up about 1% on Monday. Barclays started it as Overweight with a $21 target, and Morgan Stanley also started it as Overweight, with a $21 target. JMP Securities started it as Outperform with a $20.50 target, and Credit Suisse started coverage as Outperform with a $21 target. Citigroup started Cushman & Wakefield as Neutral with a $19.50 target.24/7 Wall St.
5 Analyst Stock Picks Under $10 Given Massive Upside Targets

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​AUGUST NEWSLETTER 9

Daniel Cullinane CPA

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MBA Taxation

Daniel Cullinane CPA

2500 Plaza 5 25th fl  Jersey City NJ 07311                                                          phone 732-516-1648  fax 732-516-9778

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