For Immediate Release
Chicago, IL – November 3, 2010 – Zacks.com Analyst Blog features: Marathon Oil Corporation (MRO), ExxonMobil (XOM), ConocoPhillips (COP), Royal Dutch Shell PLC (RDS.A) and Corning Inc (GLW ).
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Here are highlights from Tuesday’s Analyst Blog:
Marathon Profits Shoot, Stocks Drops
Marathon Oil Corporation (MRO) – the fifth largest refiner and marketer of petroleum products in the U.S. – reported a jump in its third-quarter 2010 profits.
As has been the case with the larger rivals that have already reported, such as ExxonMobil (XOM), ConocoPhillips (COP) and Royal Dutch Shell PLC (RDS.A), results were boosted by higher fuel prices. Much-improved downstream margins also contributed towards Marathon’s strong results.
Earnings per share, excluding special items, came in at $1.00, comfortably beating the Zacks Consensus Estimate of 94 cents and significantly ahead of the year-ago period adjusted profit of 61 cents. Quarterly revenue of $18.6 billion was up 28.3% from the year-earlier level, and was 2.3% above our projection.
Guidance
Marathon estimates FOURTH quarter 2010 E&P production available for sale in the range of 410,000 – 425,000 BOE/d, excluding the effect of any future acquisitions or disposals. Full year guidance is 390,000 BOE/d, at the lower end of its previous guidance.
Our Recommendation
Despite the robust third quarter results and the strong outlook, Marathon shares currently retain a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.
We like Marathon’s large and geographically-diverse reserve base and strong inventory of development projects (that provide visible production growth over the coming years).
However, the uncertain commodity-price environment and the heavy downstream exposure will continue to weigh on Marathon’s revenue and profitability, at least in the near term. As such, we see the stock performing in line with the broader market.
Corning Posts Weak Q3, As Expected
Corning Inc’S (GLW ) third quarter 2010 results were disappointing, with earnings missing the Zacks Consensus Estimate by 2 cents (4.0%) and revenue missing by 1.5%. However, shares were down a mere 0.22%, since investors were already on their guard, following press reports about the inventory correction in the LCD TV market.
Revenue
Corning reported revenue of $1.60 billion, which was down 6.4% sequentially and 8.3% year over year. On September 14, Corning mentioned that glass volumes for the quarter would be down 5% due to lower utilization rates at Taiwanese and Japanese manufacturers. However, volumes were even lower.
Guidance
In the fourth quarter, Corning expects display glass volumes to be flat to down slightly for both the wholly owned and SCP businesses (in line with the market). Glass prices are expected to decline, similar to the second quarter. Telecom segment sales are expected to be down 10% sequentially from the seasonally strong third quarter. Environmental Technologies is expected to come in flat sequentially, Specialty Materials up 10%-20% (driven by Gorilla Glass) and Life Sciences up 5%.
Corning has lowered 2010 capex expectations from $1.2 billion to $1 billion. Capex expectations for 2011 remain at approximately $2 billion. Funds will be used to build a Gorilla Glass manufacturing facility.
Our Take
Corning’s third quarter results were disappointing, with both revenue and EPS missing our estimates. We were of course not too surprised, since the inventory correction was known to all and the magnitude alone accounted for the variation from estimates. Corning stated that typical fourth quarter demand would help burn off some inventory and hasten the return to growth.
Considering the fact that Korean manufacturers are already increasing utilization, this could be a slight positive. However, we don’t really expect much improvement until after the first quarter of 2011. Telecom will also take a turn for the worse. However, both Environment Technologies and Specialty Materials (Gorilla Glass) are expected to remain strong.
Given the mixed outlook, we believe the movement in share prices will be limited. The stock, therefore, carries a Zacks #3 Rank, which translates into a short-term “Hold” recommendation (1-3 months). Our longer-term (3-6 months) rating remains “Neutral”.
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