For Immediate Release
Chicago, IL – May 24, 2010 – Zacks.com Analyst Blog features: Halliburton Co. (HAL), Transocean (RIG), BP plc (BP), Acergy S.A. (ACGY) and Progressive Corporation (PGR).
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Here are highlights from Friday’s Analyst Blog:
Earnings Scorecard: Halliburton
Last month, Halliburton Co. (HAL) – one of the largest oilfield service providers in the world – announced its financial results for the first quarter ended March 31, 2010.
Now that the Wall Street analysts have had some time to digest the quarterly performance of Halliburton, they are weighing in with their estimate revisions. Below we cover the results of the recent earnings announcement, subsequent analyst estimate revisions and Zacks ratings for the outlook for the stock.
Out of 31 analysts covering the stock, 10 have revised upwards their estimates for 2010, while 3 have gone in the opposite direction. Looking forward to 2011, the trend is more or less similar. Out of 29 analysts, 8 improved upon their estimates while just 3 had negative revisions.
Estimates are up for the June and September quarters of 2010 as well. For the current quarter, 10 of the 27 analysts have increased their estimates over the last 30 days, as compared to only 2 negative revisions. Third quarter estimates have also been revised upwards by 8 analysts (out of a total of 27) with 4 downward revisions in the last 30 days.
This impressive trend in estimate revisions promises a consistent stream of earnings, buoyed by a strong first quarter performance in tandem with more favorable operating scenario for the remainder of 2010 and beyond.
However, the last 7 days have not seen any estimate changes (as clear from the table below), indicating that the revisions were in response to the company’s earnings announcement and the encouraging news from the Congressional hearings last week that absolved Halliburton of the liability in the huge oil spill accident in the Gulf of Mexico.
As a reminder, on April 20, offshore driller Transocean’s (RIG) ultra-deepwater Horizon platform, contracted to British major BP plc (BP), sank following a fire and explosion while operating in the U.S. Gulf of Mexico off Louisiana’s coast. The incident killed 11 workers and caused one of the worst oil spills in U.S. history. Halliburton, which provided blowout-prevention equipment, got entangled in the incident.
Despite the robust first quarter results and the strong outlook, our short-term as well as long-term recommendations on Halliburton remain Hold (Zacks #3 Rank) and Neutral, respectively.
We like Halliburton’s leading position in the global oilfield services market, its geographic and operational diversity, and its robust financial profile. The company, with its broad and technologically complex product and service offerings, enjoys a strong competitive profile.
During the first quarter earnings release, Halliburton management indicated that the North American markets continue to strengthen. Land activity in the U.S. increased, as energy operators persisted with the development of unconventional reservoirs and firm oil prices led to an increase in oil-related drilling activity.
Natural gas fundamentals, however, still remain weak. The continued glut in domestic gas supplies, the end of the three-month cold snap (from December 2009 through February 2010), as well as the rapid rise in the natural gas rig count, has re-fueled investor skepticism about natural gas prices.
Within the oilfield services group, we are positive on London-based Acergy S.A. (ACGY). With a healthy backlog, significant cash balances, and no near-term refinancing requirements, Acergy should weather the challenging business environment. Our favorable recommendation on Acergy ADRs also reflects the company’s strong leverage to the still very favorable outlook for deepwater oilfield activities and the quality of its client base, which mostly includes well-capitalized oil majors or national oil companies. This is supported by our short-term as well as long-term recommendations of Strong Buy (Zacks Rank #1) and Outperform, respectively.
Progressive Disappoints
Progressive Corporation’s (PGR) net income for April 2010 came in at $111.1 million, down 4% from $116.2 million recorded in the comparable year-ago period. Income for the reported month was also down by 12% from $126.3 million reported in March 2010.
However, earnings per share remained flat compared with the year-ago month at 17 cents. This compares unfavorably with earnings of 19 cents per share reported in March 2010. Higher expenses primary resulted in lower earnings for the reported month.
The company, which reports results on a monthly basis, recorded a net premium written of $1,473.7 million, up 4% from $1,414.5 million in April 2009 and 23.6% from $1,192.6 million in March 2010. Net premiums earned were $1,374.5 million, up 4% from $1,322.2 million in the year-ago period and 21.1% from $1,092.1 million in the prior month.
Net realized gains on securities were $8.0 million, up from $2.6 million in the prior-year period and down from $27 million in March 2010. However, the combined ratio, which reflects the percentage of premiums paid out as claims and expenses, deteriorated slightly to 90.7% from 89.2% recorded in the year-ago period and 88.2% in the preceding month.
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