Copyright © Daniel Cullinane CPA.
The U.S. economy finished the year on a softer note than previously estimated, and new data shows corporate-profit growth stalled, pointing to weak momentum at the start of 2019.
Businesses faced slower consumer spending and rising labor costs, which could signal more moderate growth this year despite a strong labor market.
Gross domestic product, a broad measure of goods and services produced across the economy, rose at a 2.2% annual rate in the fourth quarter, adjusted for seasonality and inflation, down from an earlier estimate of 2.6%.
A measure of U.S. company earnings, corporate profits after tax with inventory valuation and capital-consumption adjustments, posted no growth in the fourth quarter compared with the prior three months, the Commerce Department reported Thursday.
That marked a slowdown from a 3.5% quarter-over-quarter increase in the third quarter, 2.1% in the second and 8.2% in the first. Measured from a year earlier, after-tax profits rose 14.3%, which was the slowest year-over-year increase of any quarter in 2018 but nonetheless robust by historical standards.
MORE ON THE ECONOMY
U.S. Consumer Spending Edged Up in January March 29, 2019
U.S. Economy Had Less Momentum Heading Into 2019 as Corporate Profits Stalled March 28, 2019
U.S. Jobless Claims Fell Last Week March 28, 2019
U.S. Trade Gap Narrowed Sharply in January March 27, 2019
Earnings had a strong run earlier in 2018 due at least in part to a cut in the federal corporate-tax rate to 21% from 35% starting in January 2018. That impact eased toward the end of the year, when concerns about trade negotiations with China, a slowing global economy and the start of a partial government shutdown resulted in steep stock selloffs.
Per-share profits rose 16.9% year-over-year in the fourth quarter for the biggest U.S. publicly traded companies, according to financial-data firm Refinitiv. That was the slowest growth rate of the year, but the fifth straight quarter of double-digit earnings growth for companies in the S&P 500. Meantime, revenues grew 5.1% over fourth-quarter 2017, the slowest pace since mid-2017.
“Companies did not produce the cash flow as much as they did in [the third quarter],” said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, citing higher costs for companies. He added that while consumers continued to spend, they were “a bit more selective about where they were spending.”Weakening Profit GrowthYear-over-year growth in after-tax corporateprofits had a strong run in 2018 butmoderated in the final quarterSource: Commerce Department via St. Louis FedNote: After-tax corporate profits with inventoryvaluation adjustment and capital consumptionadjustment, percent change from year ago,seasonally adjusted annual rate
In the broader economy, spending by consumers, state and local governments and businesses was revised lower in the fourth quarter, while foreign trade exerted a slightly smaller drag on growth compared with last month’s estimate.
That suggests corporate earnings moderated last quarter as consumers tapped the brakes on their discretionary spending, even as businesses continued to invest.
The Commerce Department data showed consumer spending, which accounts for more than two-thirds of the economy, was weaker in the fourth quarter than initially estimated, largely due to sharp downward revisions to spending on long-lasting items like recreation goods and vehicles. Consumer spending increased at a 2.5% annual pace from October to December, compared with 3.5% in the third quarter.
In the recreational-vehicle industry, both manufacturer Winnebago Industries Inc. and dealership company Lazydays Holdings Inc. reported lower revenues in their most recent quarters.
Winnebago Chief Executive Michael Happe said in an earnings call earlier this week that the sector has come under pressure from higher product prices due to increased tariff and material costs, rising short-term interest rates in the second half of 2018 and financial-market volatility.
He also cited uncertainty and anxiety among consumers, including about the size of their 2018 tax returns and “where the economy is truly headed.”GDP, annualized quarterly changeSource: Commerce DepartmentNote: Adjusted for inflation and seasonality
%Q4 (2nd reading): 2.2%Estimate: 2.6%2011’12’13’14’15’16’17’18-2-10123456
Rick Collins, president of Elkhart, Ind.-based Cleer Vision Windows Inc., which makes windows for recreational vehicles, said that demand weakened in the fourth quarter in its recreational-vehicle segment “and we’re still seeing some softness carrying through.”
As a whole, he said, 2018 was extremely strong for the first three quarters but “the fourth quarter tempered the year as a whole.”
Still, at the Lather and Fade Shop, a barber shop in Elkhart, which is a hub for the RV industry, manager Brooklynn LeDoux said business is going well and the store is profiting from its location near RV factories.
“People are spending lots of money, they’re getting products and tips are flowing,” she said.
Other industries that, like the RV sector, are sensitive to higher borrowing costs, struggled in the fourth quarter as the Federal Reserve continued to push short-term interest rates higher. The housing sector was a headwind for growth for the fourth quarter in a row as residential investment fell at a 4.7% annual pace. Investment in nonresidential structures declined at 3.9% rate in the fourth quarter.
In the GDP report, fixed nonresidential investment, a measure of capital expenditures, was revised lower for the fourth quarter from the Commerce Department’s initial estimate, due to a downward revision to spending on intellectual-property products like software.
Business investment still helped drive overall GDP growth in late 2018, contributing 0.73 percentage point to the fourth quarter’s 2.2% growth rate. In another positive sign for the U.S. economy, growth in exports was revised slightly higher from last month’s estimate, to a 1.8% annual pace, while the rate of imports was revised down to a 2% annual rate. That meant foreign trade exerted a mild 0.08 percentage point drag on growth, smaller than initially thought.
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By one measure of the nation’s total output for 2018 compared with total output for 2017—which offers a look at broader trends—the economy grew 2.9% last year, unchanged from the prior reading.
By a separate measure, output in the fourth quarter of 2018 versus the fourth quarter of 2017—which gives a look at more recent trends—the economy grew 3.0% last year. That was slightly below the initial estimate of 3.1% growth.
U.S. growth has appeared to slow in the current quarter, depressed by growing global economic uncertainty, a polar vortex and a partial federal government shutdown that lasted through late January.
The first quarter ends on Sunday, and the U.S. government is expected to release its initial estimate for first-quarter GDP on April 26. Forecasting firm Macroeconomic Advisers on Thursday projected a GDP growth rate of 1.4% in the first three months of 2019.
For 2019, many economists and businesses say they expect growth to moderate as the effects of the 2017 tax cuts wane, but they say the economy remains supported by low unemployment and rising incomes.
“I still think the consumer backdrop is quite positive,” Macy’s Chief Executive Jeff Gennette said at a retail-technology conference earlier this month. While the retailer doesn’t expect the economy to grow as robustly as in 2018, “it’s still going to grow well,” he said.
The Federal Reserve predicts 2.1% growth from the fourth quarter of 2018 to the fourth quarter of 2019.
STOCKS WITH UPSIDE
Many investors flocked into the utility sector during and after the Great Recession. After all, this was a safety and defensive investing strategy, first and foremost. But the sector also offered investors high dividend yields at a time when interest rates were next to zero. But now that interest rates have risen handily, those interest rates have started to tick lower on the long-end of the yield curve. Some investors might be thinking that the safety and income from utilities already has seen its upside.
Merrill Lynch does not feel that way at all. During the week of March 29, 2019, the firm increased its price objectives on many top utility stocks in its coverage universe, and it has Buy ratings on many of these names. While not all the utility shares come with Buy ratings, even some of the more cautious names saw their price objectives raised substantially.
Here 24/7 Wall St. offers a brief review of each company, along with the respective hikes in the price objective and the 52-week trading ranges and Refinitiv consensus analyst target prices.
The electric utilities team at Merrill Lynch is made up of seven named analysts making the reports. With several utility companies embarking on substantial renewable build-outs across the firm’s coverage universe, the firm examined the nuances of tax credits and the major players that utilize various recognition methods. The firm does note that it continues to see tax credit valuation as an evolving debate and only a portion of utility investors have adequately delved into the subject.
While the views are hard to see universally at each and every utility, Merrill Lynch looked into the recognition of investment tax credits (ITCs) for solar and offshore wind to allow for more flexibility for these companies to elect to recognize ITCs in earnings over a shorter or longer duration. The added flexibility could be viewed as advantageous, but the firm also thinks it should be examined more diligently by investors.
The Merrill Lynch report also looked at how investors should value the tax equity contribution in overall utility earnings rather than based on traditional P/E (price-to-earnings) ratio analysis. The report said:
While many investors traditionally view utility earnings on a P/E basis, applying the same methodology to tax credits can be misleading given the lack of transparency and eventual sun-setting of incentives for renewables. With tax credits frequently taken on a very short duration basis, all of the earnings power of assets is effectively accelerated into the initial years of the structure. Thus, we caution from putting a multiple on these earnings as they are effectively interest expense tied to the tax equity, and instead encourage a DCF approach. We believe reconciling the full extent of earnings power through this method rather than applying a P/E multiple to earnings that remain generally opaque is more appropriate… We see proper value less than half (~45%) of that that would be applied on a straight P/E basis. As renewable development continues to proliferate, we believe these considerations will become increasingly important when assigning value to tax credits in earnings that are generally less in quality.
Ameren Corp. (NYSE: AEE) is a public utility holding company operating in electricity and natural gas throughout Middle America. Merrill Lynch raised its price objective to $77 from $70 (versus a $73.46 prior close). Ameren has a 2.5% dividend yield, a 52-week range of $55.01 to $74.91, and a consensus price target of $70.78.
American Electric Power Co. Inc. (NYSE: AEP) is a top utility with millions of customers in middle America as well. The firm raised its price objective to $94 from $90 (versus an $83.79 close). AEP has a 3.1% dividend yield, and the company historically has been one of the most vocal dividend supporters of all utilities. Merrill Lynch has a Buy rating and noted that AEP acquired new wind through Sempra and is likely in the early stages given roughly $1 billion remaining in its renewable capex guidance. The 52-week range is $62.71 to $86.10, and the consensus price target is $82.75.
American Water Works Co. Inc. (NYSE: AWK), America’s leading water utility, saw its price objective raised to $114 from $103 (versus a $104.32 close). Merrill Lynch has a Neutral rating despite that big upside. Its dividend yield is 1.7%. The 52-week range is $77.73 to $107.71, and the consensus price target is $103.46.
Avangrid Inc. (NYSE: AGR) operates a natural gas and renewable energy utility company in the northeastern part of the United States. Merrill Lynch has a Neutral rating but raised its price objective to $54 from $52 (versus a $50.01 close) in a sum-of-the-parts valuation, compared with the most recent closing price of $50.01. The stock has a dividend yield of 3.5%. The 52-week range is $45.81 to $54.55, and the consensus price target is $50.38.
Black Hills Corp. (NYSE: BKH) is an electric and natural gas utility company with customers in Colorado, Montana, South Dakota and Wyoming. Its price objective was raised to $75 from $71, along with a Neutral rating, and it comes with a 2.7% dividend yield. The 52-week range is $52.63 to $74.77. The consensus price target is $68.67.24/7 Wall St.
Every time oil gets up around the $60 a barrel level, President Trump talks it back down some with a tweet. While that can be disconcerting for energy investors, the reality is oil has had a big run off the mid-$40s lows back in the winter. The good news is most on Wall Street are modeling $50 to $55 levels for West Texas Intermediate (WTI) for this year, and many of the top companies can make solid money at those levels.
While the president did jaw down the price some on Thursday, WTI is still trading closer to $60 than $50, and with the busy summer driving season just about eight weeks away, and production from OPEC expected to stay lower, the sector makes sense for growth investors now.
We screened the Goldman Sachs energy coverage universe and found four stocks rated Buy that have big implied upside to the firm’s price targets.
This top stock is still down a stunning 30% from highs printed in October, and it is also a solid liquefied natural gas (LNG) play. Anadarko Petroleum Corp. (NYSE: APC) operates through three segments. The Oil and Gas Exploration and Production segment explores for and produces natural gas, oil, condensate and natural gas liquids (NGLs). The other segments are Midstream and Marketing.
Anadarko has the capacity to sustain planned stock buybacks at current levels, providing support to close a value gap that many on Wall Street see at 50%. Strong free cash flow, enabled by advantaged Brent leverage, has competitive free cash compared with traditional large-cap “yield” names, but with competitive growth potential. The company has made a transition toward compelling value with growth and yield.
Anadarko Petroleum shareholders are paid a 2.66% dividend. The Goldman Sachs price target for the stock is $67.50. That compares with the Wall Street consensus price objective of $68.89. The shares closed trading on Thursday at $45.07.
Last year, this company bought RSP Permian for $9.5 billion, and most on Wall Street liked the deal as a good bolt-on acquisition. Concho Resources Inc. (NYSE: CXO) is an independent oil and natural gas company engaged in the acquisition, development and exploration of oil and natural gas properties.
It offers investors a unique combination of investment themes, including valuation, rate-of-change and resource expansion themes. The company is the largest acreage holder of the publicly traded Permian large-caps and provides investors peer-leading exposure to three of the most impactful catalysts across the Delaware Basin, including the Wolfcamp XY, Wolfcamp D and Bone Spring Shale.
Concho Resources has reported strong earnings but still has a lot of upside to the posted price targets.
Goldman Sachs has a price target of $160, while the posted consensus target is $157.18. The stock closed most recently at $111.31 per share.
This leading energy company is on the Goldman Sachs Conviction Buy List. EOG Resources Inc. (NYSE: EOG) is one of the largest independent exploration and production companies operating in the United States, Canada, Trinidad, the United Kingdom and China.
The company has a big well in Loving County in the Delaware Basin. Top analysts say the well ranks as one of the best they have ever seen in the basin, and it could easily impact other companies drilling in the region. EOG’s average dollar gross per well on a yearly basis ranks third among all operators.
EOG shareholders are paid a small 0.95% dividend. The $128 price target at Goldman Sachs compares with a consensus target last seen at $119.78. The shares were changing hands on Thursday’s close at $95.24 apiece.
This is one of the highest yielding domestic stocks in the energy sector. Occidental Petroleum Corp. (NYSE: OXY) is an oil-levered multinational organization with principal business segments in oil and gas and in chemicals. The oil and gas segment explores for, develops, produces and markets crude oil and natural gas, primarily in the U.S. Permian Basin, Colombia, Bolivia, Libya, Oman, Qatar and Yemen. Meanwhile, the chemicals segment manufactures and markets basic chemicals, vinyls and performance chemicals.
With the company’s rock solid balance sheet and a commitment to dividend coverage, investors look safe for now. Occidental has paid quarterly cash dividends continuously since 1975, and it has increased its dividend each year since 2002.
Shareholders of Occidental are paid a sizable 4.70% dividend. Goldman Sachs has set its price target on the shares at $81. That compares with a posted consensus target of $77.83, as well as the most recent close at $66.57 a share.
ALSO READ: 5 Merrill Lynch US 1 List Stocks That Pay the Highest Dividends
Pioneer Natural Resources
Many Wall Street analysts love this stock for a pure crude oil play, and it also resides on the Goldman Sachs Conviction Buy List. Pioneer Natural Resources Co. (NYSE: PXD) operates a modern fleet of more than 24 top performing drilling rigs throughout onshore oil and gas producing regions of the United States and Colombia. Pioneer production services are supported by 100 well-servicing rigs, more than 100 cased-hole, open-hole and offshore wireline units, and a range of advanced coiled tubing units.
Pioneer is a huge player in the Permian Basin and the Eagle Ford in Texas, and the company owns more than 20,000 locations in the world’s second-largest oil reservoir in the Midland Basin. With a stellar balance sheet, the company is poised to remain a top player in the Permian as it expects to deliver solid production growth in 2019 and beyond.
Its unmatched depth of low-cost inventory and balance sheet allow Pioneer to compete favorably in both mild and moderate recovery case scenarios. In addition to asset and financial strength, many analysts feel that Pioneer offers the second highest multiple contraction among the large-cap Permian pure-play peers, as well as the highest free-cash-flow yield.
Pioneer investors are paid a tiny 0.22% dividend. The Goldman Sachs price target is $200. The analysts’ consensus estimate is just below that level at $197.18, and the stock closed trading at $152.91 a share on Thursday.
After trading down to the mid-$40s in December and January, oil has surged back to the $60 a barrel level for West Texas Intermediate. And with many Wall Street firms seeing higher oil prices this summer due to OPEC production cuts and restrictions on Iran and Venezuela, the sector is looking much stronger. Oddly, the oilfield services stocks have not rallied with the price of crude and may be offering investors the best entry points in years.
With oil pushing higher and drilling permits also starting to spike up, the analysts at SunTrust Robinson Humphrey are positive on second-quarter activity that could prove to be a strong catalyst for the sector. We screened the firm’s coverage universe for oilfield services and found four top companies that are leaders in the sector that look like solid ideas now. All are rated Buy.
General Electric announced late last year it will be divesting a large part of its interests in this company, which could provide some life to the shares. Baker Hughes, a GE Company (NYSE: BHGE) is a provider of integrated oilfield products, services and digital solutions. Its products and services include upstream, midstream, downstream, industrial and digital.
The upstream unit includes evaluation, drilling, completions and production. Midstream enables the power and compression efficiency for liquefied natural gas (LNG) and pipeline and storage. Downstream builds reliability and safety into process operations that include refining and petrochemical and fertilizer solutions.
Baker Hughes industrial solutions offers power generation to advanced control systems and sensing technology that power industrial facilities. Digital transformation integrates data on an open platform with security and scale. This unit enables field services with real-time insights.
Shareholders receive a 2.60% dividend. The SunTrust price target for the shares is $35, and the Wall Street consensus target is $31.89. The stock closed Tuesday at $27.68.
This stock is down almost 42% since late May of 2018 and remains a top large-cap oil services pick across Wall Street. Halliburton Co. (NYSE: HAL) is one of the world’s largest providers of products and services to the energy industry. It serves the upstream oil and gas industry throughout the life cycle of the reservoir, from locating hydrocarbons and managing geological data to drilling and formation evaluation, well construction and completion, and optimizing production through the life of the field.
Halliburton is the second-largest provider of oil services and the number one player in pressure pumping services worldwide. For investors looking for an oilfield services company to add, this is arguably the best, and analysts feel it will be a huge benefactor as the frac market has tightened significantly and prices are 20% to 30% off the lows.
SunTrust has noted in the past that Halliburton’s business is dependent on commodity prices. As economic cycles proceed, commodity prices fluctuate. A low-price environment triggered by anemic economic growth or excessive production growth would limit demand for goods and services. With oil rising strongly this year, the worst for the company may be over.
Halliburton shareholders receive a 2.53% dividend. SunTrust has a $50 price target, while the consensus target is $38.97. Shares closed Tuesday at $28.47.24/7 Wall St.
Why the Best Banks Now Offer Some Incredible Upside Potential
Helmerich & Payne
This large-cap sector leader is perhaps a safer and more conservative play. Helmerich & Payne Inc. (NYSE: HP) is the largest U.S. land driller and provides onshore drilling services primarily in the United States. It also offers land rigs internationally, as well as offshore platform rigs in the Gulf of Mexico.
The company provides drilling rigs, equipment, personnel and camps on a contract basis to explore for and develop oil and gas from onshore areas and fixed platforms, tension-leg platforms, and spars in offshore areas. Its contract drilling business operates through three reportable segments: U.S. Land, Offshore and International Land.
In the past, the RBC analysts have cited that the company has the best U.S. land drilling rigs, the most upgradeable rigs, the best capital structure and a 47-year history of dividend increases.
Investors receive a fat 5.11% dividend. The strong $71 SunTrust price target compares with the $65.08 consensus target. Shares closed Tuesday at $55.63.
This top oil services company is expected to benefit from increased global exploration and production spending. Schlumberger Ltd. (NYSE: SLB) is the world’s largest provider of services and equipment used in drilling, evaluation, completion, production and maintenance of oil and natural gas wells.
The company operates in the oilfield service markets through three groups: Reservoir Characterization, Drilling and Production. Reservoir Characterization Group consists of the principal technologies involved in finding and defining hydrocarbon resources. These include WesternGeco, Wireline, Testing Services and Schlumberger Information Solutions.
Rising activity, backlog additions for integrated projects and the possibility that international pricing has bottomed and should improve the rest of 2019 should be supportive of improving earnings over the next few years.
Shareholders receive a 4.60% dividend. The SunTrust price target is $60. The consensus target is $53.68, and shares closed at $43.05.
While most of Wall Street focuses on large and mega cap stocks, as they provide a degree of safety and liquidity, many investors are limited in the number of shares they can buy. Many of the biggest public companies, especially the technology giants, trade in the low-to-mid hundreds, all the way up to over $1,000 per share. At those steep prices, it’s pretty hard to get any decent share count leverage.
Many investors, especially more aggressive traders, look at lower-priced stocks as a way to not only make some good money but to get a higher share count. That can really help the decision-making process, especially when you are on to a winner, as you can always sell half and keep half.
We screened our 24/7 Wall St. research database and found five stocks covered by top Wall Street analysts that are trading under the $10 level and could provide investors with some solid upside potential. While much more suited for aggressive accounts, they could prove exciting additions to portfolios looking for solid alpha potential.
This stock has been on a roll and is close to breaking out. Harmonic Inc. (NASDAQ: HLIT) engages in the development and sale of video delivery software, products, system solutions and services. The Video segment, one of the two through which it operates, sells video processing and production and playout services to cable operators, satellite and telecommunications pay-TV service providers, and broadcast and media companies, including streaming new media companies.
The other is the Cable Edge segment, which markets cable access solutions and related services, such as CableOS software-based Converged Cable Access Platform (CCAP) solutions.
Stifel has a $7 price target on the shares, but the Wall Street consensus target is just $5.88. The stock was trading at Friday’s close at $5.42 per share.
This small-cap oil and gas exploration company came in with some strong quarterly results. Rosehill Resources Inc. (NASDAQ: ROSE) engages in the acquisition, exploration, development and production of unconventional oil and associated liquids-rich natural gas reserves in the Permian Basin.
Last week the company announced it grew average net production to 22,779 barrels of oil equivalent per day (73% oil and 87% total liquids), an increase of 15% compared to the third quarter of 2018. In addition, the company reported net income attributable to Rosehill of $50.2 million, or $2.35 per fully diluted share, for the fourth quarter of 2018, which included a $199.4 million noncash, pretax gain on commodity derivative instruments.
The SunTrust analyst has a $6 price target for the shares. The posted consensus figure was last seen at $6.73, and the stock closed at $3.40 on Friday.
This stock has massive implied upside to the Stifel analysts target. Stonebridge Biopharma PLC (NASDAQ: SBBP) operates as a commercial-stage biopharmaceutical company that focuses on the development and commercialization of therapies for rare diseases. Its pipeline is comprised of Keveyis, Macrilen, Recorlev and Veldoreotide.
Last week the company presented new data analyses from the Phase 3 SONICS study of Recorlev for the potential treatment of endogenous Cushing’s syndrome. Improvements in hemoglobin A1c and fasting blood glucose in the maintenance phase were more pronounced among patients with comorbid diabetes mellitus, while antidiabetic medications were more often decreased than increased.
In addition, the clinicals showed significant improvements in cardiovascular risk markers of low-density lipoprotein (LDL)-cholesterol, weight, body mass index and waist circumference were seen in patients with and without diabetes mellitus. Additionally, improvement in LDL-cholesterol occurred without any new use of statins or increases in statin dose.
The massive $15 Stifel price target compares to a $14.29 consensus across Wall Street. The stock ended the week at $4.98 per share.
This stock has been blitzed over the last year and offers aggressive accounts a very timely entry point. Sientra Inc. (NASDAQ: SIEN) as a medical aesthetics company that engages in developing and commercializing plastic surgery implantable devices. It operates through two reportable segments.
The Breast Products segment focuses on sales of its breast implants, tissue expanders and scar management products under the brands Sientra, AlloX2, Dermaspan, Softspan and Biocorneum. The miraDry segment focuses on sales of the miraDry System, consisting of a console and a handheld device that uses consumable single-use bioTips.
With breast implants under scrutiny lately, the company told the FDA that the primary focus is upholding the highest levels of patient safety. Importantly, the totality of the firm’s clinical and real-world data, including its 10-year Post-Approval Cohort Study, which included almost 1,800 participants fully met FDA’s compliance requirements, and has confirmed the long-term safety and effectiveness of the company’s products.
Stifel has set its price target at $16. The higher consensus figure is $19.50, and shares were trading at $8.58 as the week came to a close.
ALSO READ: Why Mega-Cap FANG Tech Leaders May Be Offering Investors Incredible Value
This small-cap driller may provide some serious upside for energy accounts. W&T Offshore Inc. (NYSE: WTI) engages in the production, exploration, development and acquisition of oil and natural gas properties. Its operations are focused in the Gulf of Mexico.
Last week the company was the apparent high bidder on eight deepwater and seven shallow-water blocks, which includes Garden Banks 173; Green Canyon blocks 3, 46, 47, 49, 91 and 92; and Mississippi Canyon 244 in the deepwater, as well as Eugene Island blocks 357, 378, 393, 395, 396; Main Pass 286; and South Marsh 205 in the shallow water.
These 15 blocks cover approximately 73,500 acres and, if awarded, the company will pay approximately $3.5 million for all the awarded leases combined, which reflects a 100% working interest in the acreage. All the blocks have a five-year lease term, with the exception of one of the deepwater blocks, which has a seven-year lease term. The royalty rate for eight of the blocks is 12.5%, and the remaining seven leases are at a rate of 18.75%.
The Stifel team has a $10 price target. The consensus target is $7.25, and the shares were last seen at $6.90 apiece.I'm interested in the Newsletter
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These are five stocks for aggressive accounts that look to get share count leverage on companies that have sizable upside potential. While not suited for all investors, these are not penny stocks with absolutely no track record or liquidity, and major Wall Street firms have research coverage on them all.
MARCH NEWSLETTER 8
GAS PRICING UP
Industry analysts at Cox Automotive have forecast that March sales will total 1.55 million light vehicles (cars, SUVs, and pickups). That’s down 7% year over year for the month. The seasonally adjusted annual rate (SAAR) of sales for light vehicle sales drops from 17.2 million in March 2018 to 16.8 million.
If the March forecast pans out, first quarter unit sales will have dipped from 17.1 million a year ago to 16.7 million this year, a drop of 2.3%. March is a typically strong month for new car sales as consumers shed their winter clothes and begin to anticipate the warmer weather ahead.
Cox Automotive’s chief economist, Jonathan Smoke, said:
The year has started relatively soft for new-vehicle sales. January was a combination of factors, some of which were related to the broader economy. The government shutdown, decline in consumer confidence, and the polar vortex all detracted from the economy and new-vehicle sales in January. We had somewhat better weather in February, in most of the U.S., an open government and a rebound in confidence, yet new-vehicle sales did not improve. Now we know that consumer confidence again moved down in March. It’s looking like the new-vehicle market is suffering in part from the overdue resumption of the normal, post-peak slowdown that was temporarily disrupted last year by tax reform.
Here’s how Cox sees first-quarter sales for several automakers:
General Motors: down 6.5% year over year; unit sales of 668,913; market share of 17%
Ford: down 2.6%; 581,574 units; 14.8% share
Toyota: down 5.8%; 538,769 units; 13.7% share
Fiat Chrysler: down 3.2%; 498,118 units; 12.76% share
Honda: down 0.4%; 361,278 units; 9.2% share
Nissan: down 14.2%; 357,083 units; 9.1% share
Volkswagen: down 5.5%; 139,838 units; 3.6% share
BMW: down 9%; 76,796 units; 2% share
Daimler: down 12.3%; 76,251 units; 1.9% share
There are a couple of tax-related issues that may have affected new car sales in the first quarter. U.S. taxpayers may have been taken by surprise when federal tax refunds were less than expected this year and fleet sales jumped last year, an effect not expected to be repeated this year.
SAN FRANCISCO (KPIX 5) — Gas prices across California are averaging $1 above the national average and refineries are being blamed for the higher prices.
A gallon of gas will cost you $3.79 in San Francisco, $3.57 in San Jose, and $3.56 in Oakland. The national average is $2.67. Prices jumped nearly 40 cents in one week.
The Valero refinery in Benicia is one of the reasons why.
The refinery experienced a malfunction at the beginning of the month and on Saturday it triggered plumes of thick gray smoke to be emitted from the facility. The particles emitted are called “coke” a byproduct of the refinery process, they’re made mostly from carbon particles.
Health officials say the air quality never reached dangerous levels but they did discourage outdoor activity.
“We should be conscientious of what’s going on at the refineries people need to step in and speak up,” Hanna Kim of San Francisco said.
Kim says while she’s concerned this won’t change her activity in the short term.
“I drive for work there’s not much I can do,” she said. “I mean I think it takes a little out of everyone’s pocket, everyone feels it,” Tyler Woods said. He added, “I think my next car will be an electric car.”
The highest gas price on record in San Francisco was in 2012 when a gallon cost $4.83, refinery shutdowns contributed to those prices too, coupled with tensions in the Middle East.
AUTO SALES DROP
TOP ANALYST PICKS
The first quarter is over, and the Dow Jones industrial average was up 11% year to date, the S&P 500 was up 13% and the tech-heavy Nasdaq generated a return of more than 16%. All of that is on top of the bull market officially turning 10 years old. Stocks were indicated to open higher on Monday after the first positive manufacturing report out of China in several months. Investors need to consider how they want their investments and assets positioned for the rest of the year and beyond.
24/7 Wall St. reviews dozens of analyst research reports each day of the week in an effort to find new trading and investing ideas for our readers. Some of the daily analyst reports cover stocks to buy, while other reports cover stocks to sell or to avoid.
Additional commentary and trading data have been added on some of the daily analyst reports. The consensus analyst price targets and other valuation metrics are from the Refinitiv (Thomson Reuters) sell-side research service.
These are the top analyst upgrades, downgrades and initiations seen on Monday, April 1, 2019.
Activision Blizzard Inc. (NASDAQ: ATVI) was reiterated as Outperform at Wedbush Securities, but the firm added the video game publisher to its Best Ideas List on word that it looks to be positioned to deliver significant outperformance over the next two years, even as muted performance of some top games could still allow it to beat earnings expectations in 2019. The firm sees Activision Blizzard being worth $60 at a 20-times earnings in 2020 figure plus its net cash.
Amazon.com Inc. (NASDAQ: AMZN) was reiterated as Outperform and the price target was raised to $2,085 from $1,975 (versus a $1,780.75 prior close) at Oppenheimer. Amazon has a consensus target price of $2,080.05.
Anadarko Petroleum Corp. (NYSE: APC) was raised to Buy from Neutral and but the price target was lowered to $65 from $74 (versus a $45.48 close) at Citigroup.
AstraZeneca PLC (NYSE: AZN) was raised to Outperform from Market Perform at Cowen.
CarMax Inc. (NYSE: KMX) closed up 9.6% at $69.80 on Friday, and on Monday its rating was raised to Overweight from Equal Weight at Stephens. It has a consensus target price of $79.15 and a 52-week trading range of $55.24 to $81.67.
Celgene Corp. (NASDAQ: CELG) closed almost 8% higher at $94.34 on Friday after two proxy firms recommended that investors support its acquisition by Bristol-Myers. As a result, it was downgraded to Neutral from Buy at UBS and to Neutral from Overweight at Atlantic Equities.
Chevron Corp. (NYSE: CVX) was started with an Overweight rating Morgan Stanley. After closing at $123.18, shares were indicated up 1% at $124.40. Chevron’s consensus target price is $137.54.
Exxon Mobil Corp. (NYSE: XOM) was started as Equal Weight at Morgan Stanley. Exxon closed flat at $80.80, and it has a 52-week range of $64.65 to $87.36 and a consensus price target of $83.99.
FedEx Corp. (NYSE: FDX) was downgraded to Hold from Buy at Berenberg. FedEx closed up 2% at $181.41, in a 52-week range of $150.94 to $266.67. The consensus price target is $221.40.
F5 Networks Inc. (NASDAQ: FFIV) was raised to Buy from Neutral and the target price was raised to $180 from $155 at Nomura/Instinet.
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Hain Celestial Group Inc. (NASDAQ: HAIN) was downgraded to Neutral from Overweight at JPMorgan. Shares closed down 1.1% at $23.12, in a 52-week range of $14.45 to $32.30. The consensus price target is $19.87.
Jabil Inc. (NYSE: JBL) was raised to Strong Buy from Market Perform at Raymond James. Shares closed up 0.4% at $26.59. The 52-week range is $21.49 to $30.21, and the consensus price target is $31.56.
Kinder Morgan Inc. (NYSE: KMI) was downgraded to Hold from Buy at Jefferies, but the firm raised its price target to $20 from $19. Shares closed at $20.01 on Friday, and the 52-week range of $14.62 to $20.44. Kinder Morgan had a $21.47 consensus target price.
Lennar Corp. (NYSE: LEN) was downgraded to Outperform from Strong Buy at Raymond James. Shares closed down 1.4% at $49.09. The have a 52-week range of $37.29 to $64.90 and a consensus price target of $56.88.
Lyft Inc. (NASDAQ: LYFT) was started only with a Neutral rating at Guggenheim, with the firm noting that its outlook may be too difficult to digest after having to look too far out with too many assumptions.
Magnolia Oil & Gas Corp. (NYSE: MGY) was started as Outperform and assigned a $15 target price at Credit Suisse.
Monster Beverage Corp. (NASDAQ: MNST) was downgraded to Neutral from Outperform at Macquarie.
Mosaic Co. (NYSE: MOS) was downgraded to Neutral from Buy at Citigroup. Shares closed flat at $54.58, in a 52-week range of $47.61 to $66.38. The consensus price target is $67.63.
NextEra Energy Partners L.P. (NYSE: NEP) was raised to Buy from Neutral and the price target was raised to $49 from $45 at Goldman Sachs.
ONEOK Inc. (NYSE: OKE) was downgraded to Hold from Buy at Jefferies. Shares closed up 0.7% at $69.84 and have a 52-week range of $50.26 to $71.99. The consensus price target is $70.40.
Peabody Energy Corp. (NYSE: BTU) was started with a Buy rating and assigned a $33 target price at Deutsche Bank.
Redfin Corp. (NASDAQ: RDFN) was raised to Overweight from Neutral and the price target was raised to $26 from $17 at Piper Jaffray.24/7 Wall St.
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Roku Inc. (NASDAQ: ROKU) was reiterated as Overweight and the target price was raised to $76 from $63 at KeyBanc Capital Markets.
Shockwave Medical Inc. (NASDAQ: SWAV) was started with a Neutral rating and was a $37 price objective (versus a $33.47 close) at Merrill Lynch.
Textron Inc. (NYSE: TXT) was started as Neutral at Credit Suisse.
United Parcel Service Inc. (NYSE: UPS) was raised to Buy from Hold at Berenberg. Shares closed up 1.3% at $111.74. The 52-week range is $89.89 to $125.09, and the consensus analyst price target is $117.09.
Wells Fargo & Co. (NYSE: WFC) was downgraded to Market Perform from Outperform at Keefe Bruyette & Woods, which lowered its price target to $50 from $58 on the belief that the bank likely will not save as much on its operating expenses as previously expected.
Y-mAbs Therapeutics Inc. (NASDAQ: YMAB) was started with a Buy rating and assigned a $36 target price (versus a $26.21 close) at H.C. Wainwright. This company has an $896 million market cap, and the stock has a 52-week range of $15.17 to $31.00.
Friday’s top analyst calls included Arista Networks, Carlyle, F5 Networks, Intuit, Oracle, Salesforce, Viacom, Viking Therapeutics, Wells Fargo and many more.
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