The turmoil in North Africa and the Middle East has put pressure on the Obama Administration to resume issuing permits for deep water drilling in the Gulf of Mexico. Noble Energy (NBL) was the first to obtain a permit since the BP (BP) disaster.
Noble is an international oil and gas exploration company that operates in the U.S. and internationally. In the U.S. it has operations on the West Coast, Rocky Mountains, mid continent and the Gulf of Mexico. Its international operations are located in the Middle East, South American and West Africa.
Things look to be pretty quiet on the economic calendar this week. Here are the highlights:
Tuesday: Weekly chain-store sales
Wednesday: Federal budget balance for January
Thursday: Wholesale trade data in December
Friday: Trade balance in December and the weekly inflation survey
However, three iconic companies -- Walt Disney (DIS), Coca-Cola (KO) and Hasbro (HAS) -- highlight this week's quarterly results. Here's a look at what analysts surveyed by Thomson Reuters are anticipating from these and others.
RBC Capital upgraded FMC Technologies (FMC) to outperform from sector perform. The firm upgraded shares based on expectations that subsea order flow and backlog will be significantly higher than previous forecasts. The firm has a $70 target on shares.
Citigroup upgraded ONEOK Partners LP (OKS) to buy from hold due to valuation and maintains a $65 price target on the stock.
Needham upgraded Autodesk (ADSK) to buy from hold following the Q4 report and guidance. The firm has a $31 target on the stock.
Morgan Stanley upgraded Under Armour (UA) to equal weight from underweight, citing valuation. The firm raised its target to $27 from $23.
EOG Resources (EOG) was upgraded to buy from neutral at Goldman.
FPL Group (FPL) was upgraded to outperform from neutral at Credit Suisse.
Novo Nordisk (NVO) was upgraded to buy from hold at Jefferies.
Noble Energy (NYSE: NBL - option chain) shares have risen this higher morning after the company announced a major natural gas discovery in the Tamar prospect in the Mediterranean Sea off the coast of Israel. NBL owns a 36% stake in the well, and company CEO Charles Davidson called the find the largest discovery in the company's history.
If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on NBL.
NBL opened this morning at $50.44. So far today the stock has hit a low of $47.59 and a high of $50.50. As of 12:15, NBL is trading at $49.77, up 2.98 (6.4%). The chart for NBL looks neutral and S&P gives NBL a 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider a February bull-put credit spread below the $35 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think, but still leverages nice returns. For this particular trade, we will make a 6.4% return in just four weeks as long as NBL is above $35 at February expiration. Noble would have to fall by more than 29% before we would start to lose money. Learn more about this type of trade here.
NBL hasn't been below $35 in the past year except for two days in October and has shown support around $41 recently.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in NBL.
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.
The energy debate rages on as oil and gas futures bounce around with 30% corrections. Which side of the energy debate are you on? Bears say that oil and gas prices are coming back down to earth. Speculators and hedge funds bid them up, global demand is slowing and alternative forms of energy will soon replace the fossil fuels we've come to depend upon. Bulls argue that oil and gas supplies are dwindling at the same time that the emerging market economies (China, India, Brazil and 20 others) need more. As their middle class population builds they too will want cars, air conditioning and electricity and demand will increase. Most oil reserves are in countries with unstable governments and when geopolitical events get ugly, prices tend to skyrocket.
I'm a long term energy bull -- 10% of my money has been in energy stocks for the last several years and today I maintain that allocation for two reasons. First, I believe in five years, oil and gas prices will be higher than they are today. Second, owning energy is a great hedge against other asset classes like stocks, the US dollar, and inflation.
No one knows which way energy prices will go next week or month so I continually rebalance my portfolio. As my energy stocks rise, I trim them and when they fall, I add to them. If my portfolio goes to 12% energy, I sell them back down to 10% and vice versa.
Now comes the easiest part – which stocks do I pick? Easy you say? Yes – because I don't worry about stock picking due to a miraculous new invention I'll discuss below. I own three energy stocks: the U.S. Oil & Gas Exploration & Production Index (NYSE:IEO), the U.S. Oil Equipment & Services Index(NYSE:IEZ), and S&P Global Energy (NYSE:IXC). Through these three stocks, I own about 200 energy stocks in precise allocation percentages to parts of the energy sector, weighted according to my own preferences – 60% is in IEO, 30% is in IEZ and 10% is in IXC. Why pick stocks when I can own them all? Here's what I mean.
MOST NOTEWORTHY: Air France, BHP Billiton, AstraZeneca, Broadcom and Savvis were today's noteworthy downgrades:
Goldman removed shares of Air France (NYSE: AKH) from its Conviction Buy List due to the increase in the price of fuel and the possibility of an economic slowdown.
Goldman downgraded BHP Billiton (NYSE: BHP) to Neutral from Buy and removed the stock from its Pan-Europe Buy List due to valuation.
Merrill Lynch downgraded shares of AstraZeneca (NYSE: AZN) to Sell from Neutral to reflect increased competition from generic-drug makers, a poor pipeline and slow earnings growth.
Wachovia downgraded shares of Broadcom Corporation (NASDAQ: BRCM) to Hold from Buy to reflect valuation and the company's lower than expected Q3 results. Shares were also lowered to Hold from Buy at Deutsche Bank.
Stanford lowered Savvis (NASDAQ: SVVS) to Hold from Buy and notes that the company's Q3 results and Q4 revenue guidance brings the company's 2007 revenue outlook $15M below the consensus, and advises investors to remain on the sidelines. The firm believes the company's strategy is sound, but that its execution has been slow.
Analyst Upgrades
The turmoil in North Africa and the Middle East has put pressure on the Obama Administration to resume issuing permits for deep water drilling in the Gulf of Mexico. Noble Energy (NBL) was the first to obtain a permit since the BP (BP) disaster.
Things look to be pretty quiet on the economic calendar this week. Here are the highlights:
Analyst Upgrades
Analyst upgrades: 
Noble Energy (NYSE: NBL - option chain) shares have risen this higher morning after the company announced a major natural gas discovery in the Tamar prospect in the Mediterranean Sea off the coast of Israel. NBL owns a 36% stake in the well, and company CEO Charles Davidson called the find the largest discovery in the company's history. 
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. 
The energy debate rages on as oil and gas futures bounce around with 30% corrections. Which side of the energy debate are you on? Bears say that oil and gas prices are coming back down to earth. Speculators and hedge funds bid them up, global demand is slowing and alternative forms of energy will soon replace the fossil fuels we've come to depend upon. Bulls argue that oil and gas supplies are dwindling at the same time that the emerging market economies (China, India, Brazil and 20 others) need more. As their middle class population builds they too will want cars, air conditioning and electricity and demand will increase. Most oil reserves are in countries with unstable governments and when geopolitical events get ugly, prices tend to skyrocket. .gif){kind=logo}
MOST NOTEWORTHY: Air France, BHP Billiton, AstraZeneca, Broadcom and Savvis were today's noteworthy downgrades:
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