While other earnings may have disappointed last week, the news was good for oil giant ConocoPhilips (NYSE: COP). In what some took as a good sign for big oil, the Houston-based company reported that third quarter net income surged 41% year over year to $3.39 per share, and that revenue also surged 52% to $70 billion. We'll see whether the good news extends to other petroleum giants scheduled to report quarterly results this week.
Analysts surveyed by Thomson Financial are looking for BP (NYSE: BP) profits to have grown 43.2% in the most recent quarter to $2.34 per share on revenue of $109.7 billion, and Chevron Corp. (NYSE: CVX) to post earnings up 39.4% to $3.25 per share on revenue of $86.8 billion. Marathon Oil Corp. (NYSE: MRO), ExxonMobil Corp. (NYSE: XOM), and Royal Dutch Shell (NYSE: RDS.A) likewise are expected to report higher net income of $2.33 per share (sales of $23.4 billion), $2.40 per share (sales of $131.4 billion), and $2.65 per share, respectively. Even Valero Energy Corp. (NYSE: VLO) is expected to post earnings slightly higher to $1.46 per share (sales of $36.4 billion), despite the effects of Hurricane Ike. Among these companies, only BP and Valero beat earnings expectations in the previous quarter. Not surprisingly, analysts on average recommend buying all except Valero, and shares of all of these companies have recently hit 52-week lows.
Banc of America upgraded shares of Pepsi Bottling (NYSE: PBG) to Buy from Neutral on valuation as they expect better leverage in FY09 and believe an overly bearish outlook is priced in. The company's target was raised to $37 from $35.
Goldman upgraded Washington Mutual (NYSE: WM) to Neutral from Sell and said Q3 results were worse than expected but not as bad as the decline in shares suggests. The analyst said WaMu's capital and reserves appear stable and that the company might be able to avoid another capital raise. WaMu's target was raised to $4 from $5.
Greenhill & Co (NYSE: GHL) was raised to Outperform from Market Perform at Wachovia.
F5 Networks (NASDAQ: FFIV) was upgraded at JP Morgan to Overweight from Underweight.
Jefferies downgraded PharmaNet Development (NASDAQ: PDGI) to Underperform from Buy following the lowered guidance as they believe the company's execution and cost control problems have not been solved. The company's target was lowered to $15 from $27.
JP Morgan downgraded shares of Ericsson (NASDAQ: ERIC) to Underweight from Neutral to reflect their weak outlook for the company's Sony Ericsson (NYSE: SNE) handset unit.
Deutsche Bank downgraded shares of Danaher (NYSE: DHR) to Hold from Buy on valuation and concerns about the company's FX exposure.
Best Buy (NYSE: BBY) was cut to Neutral from Buy at UBS.
Portugal Telecom (NYSE: PT) was lowered to sell from Neutral at UBS and to Underweight from Neutral at JP Morgan.
Jefferies initiated Massey Energy (NYSE: MEE) with a Buy rating and $80 target. The firm expects substantial margin improvement, free cash flow, and earnings growth with eastern utility coal inventory levels under pressure and a robust export and met coal market.
William Blair started BioMarin Pharmaceutical (NASDAQ: BMRN) with an Outperform rating. The firm expects strong EPS growth during 2008-2010, thinks the company's pipeline is underappreciated by the Street, and feels expectations have been reset to a reasonable level.
Friedman Billings initiated the Lodging sector with a Market Weight rating, starting InterContinental Hotels (NYSE: IHG) and Marriott (NYSE: MAR) with outperform ratings and targets of $16 and $34, respectively, and Starwood Hotels (NYSE: HOT) with a Market Perform rating.
Citigroup initiated Diamond Offshore (NYSE: DO) with a Buy rating and $126 target.
William Blair raised Quest Diagnostics (NYSE: DGX) to Outperform from Market Perform. The firm believes that the long-term fundamentals of the clinical laboratories sectors are still strong.
UBS upgraded Massey Energy (NYSE: MEE) to Buy from Neutral on valuation.
ArthroCare (NASDAQ: ARTC) was upgraded to Buy from Hold by Lazard, since the firm expects a small restatement while they believe a large restatement is priced into the shares.
Arch Coal (NYSE: ACI) was upgraded to Buy from Neutral by UBS.
Aetna (NYSE: AET) was initiated with a Buy by Banc of America, which believes the company will experience industry-leading member growth.
Banc of America initiated Wellpoint (NYSE: WLP) with a Buy rating, as the firm expects the shares to rebound from near trough valuations.
Wachovia (NYSE: WB) was reinitiated by Friedman Billings with an Underperform rating, as the firm expects the company to incur higher credit losses than the Street expects due to its outsized exposure to residential real estate.
Six Flags (NYSE: SIX) was started with an Above Average rating by Caris.
MOST NOTEWORTHY: Countrywide Financial, AstraZeneca, Massey Energy and International Coal were today's noteworthy upgrades:
Wachovia upgraded Countrywide (NYSE: CFC) to Market Perform from Underperform, as they do not expect any other bidders to emerge and for the acquisition by Bank of America (NYSE: BAC) to close.
HSBC upgraded AstraZeneca (NYSE: AZN) to Overweight from Neutral on valuation and their belief that an agreement with Ranbaxy on Nexium is possible.
Massey Energy (NYSE: MEE) and International Coal (NYSE: ICO) were upgraded to Neutral from Underweight at JP Morgan citing higher coal price forecasts.
Consol Energy (NYSE: CNX) has two principle business units: Coal mining & methane gas. Energy legislation has been moving through Capitol Hill committees and is expected to be on the House Floor before year's end. CNX overall option implied volatility of 47 is above its 26-week average of 40 according to Track Data, suggesting larger risk.
Massey Energy (NYSE: MEE), the fourth-largest coal company in the U.S. based on produced coal revenue, closed at $34.32. Bear Stearns says, "MEE signs deal with Essar of India – Reaffirm Outperform rating." MEE overall option implied volatility of 51 is above its 26-week average of 47 according to Track Data, suggesting larger price fluctuations.
Daily Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
MOST NOTEWORTHY: UQM Technologies, Blue Nile, NPS Pharmaceuticals, Massey Energy and Hartford Financial were today's noteworthy downgrades:
Merriman downgraded shares of UQM Technologies Inc (AMEX: UQM) to Neutral from Buy after Phoenix Motorcars delayed its electric vehicle manufacturing ramp, as they view the company's Phoenix Motorcars relationship as the primary driver for near-term growth.
Citigroup downgraded shares of Blue Nile Inc (NASDAQ: NILE) to Sell from Hold on valuation as they believe near-term risks outweigh rewards. They see risk to Q3 revenue estimates and their analysis suggests an in-line quarter at best.
NPS Pharmaceuticals Inc (NASDAQ: NPSP) was downgraded to Neutral from Buy at Oppenheimer and to Hold from Buy at Jefferies. Oppenheimer lowered shares following disappointing Gattex data; Jefferies believes the P3 GATTEX results in short bowel syndrome make the chances of successful low-dose approval unpredictable.
Friedman Billings downgraded Massey Energy Company (NYSE: MEE) to Underperform from Market Perform based on valuation, 2008/2009 outlook, spinoff of Patriot Coal appears to be a better investment option, and another blow to mountaintop mining and permit issues.
JP Morgan removed The Hartford Financial Services Group Inc (NYSE: HIG) from their Focus List; however, they believe the company's fundamental outlook remains positive and expects strong Q3 results.
OTHER DOWNGRADES:
Morgan Stanley downgraded EV3 Inc (NASDAQ: EVVV) to Underweight from Equal Weight.
While other earnings may have disappointed last week, the news was good for oil giant ConocoPhilips (NYSE: COP). In what some took as a good sign for big oil, the Houston-based company reported that third quarter net income surged 41% year over year to $3.39 per share, and that revenue also surged 52% to $70 billion. We'll see whether the good news extends to other petroleum giants scheduled to report quarterly results this week. .gif){kind=logo}
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