With bonds under pressure lately, Franklin Resources (NYSE:BEN) has put themselves into a position of being ready to migrate into equities in a bigger way.
FBR said, "We continue to view Franklin as one of the better-positioned asset managers in an uncertain environment given its strong balance sheet, international distribution, and solid fixed-income platform. Strong organic client asset growth should continue, primarily driven by international equity and fixed-income products, and the company's robust cash position provides management with flexibility to pursue accretive M&A transactions, buybacks, and/or dividends."
FBR Capital reiterates an 'Outperform' on Franklin Resources, which was trading at $116.39, down $2.53, or 2.12 percent, as of 12:20 PM EST. FBR has a price target of $130 on the company.
Showing posts with label FBR Capital. Show all posts
Showing posts with label FBR Capital. Show all posts
Thursday, December 9, 2010
Thursday, December 2, 2010
Tractor Supply (NASDAQ:TSCO) Has Price Target Raised by FBR
FBR Capital raised their price target on Tractor Supply Company (NASDAQ:TSCO) while maintaining an "Underperform" rating on them.
FBR said, "We adjust our 2010E EPS estimate for TSCO to $2.18 from $2.16, and this compares with updated management guidance of $2.16–$2.19. We adjust our 2011E EPS estimate to $2.45 from $2.33, and this compares with the Street consensus estimate of $2.41 (we expect that the Street mean will go up for 2011E as well). We set our 2012E EPS estimate at $2.70 versus the Street estimate of $2.69."
Tractor Supply is trading at $44.96, gaining $1.17, or 2.67 percent as of 12:00 PM EST. FBR has a price target of $35 on them, raising it from $31.
FBR said, "We adjust our 2010E EPS estimate for TSCO to $2.18 from $2.16, and this compares with updated management guidance of $2.16–$2.19. We adjust our 2011E EPS estimate to $2.45 from $2.33, and this compares with the Street consensus estimate of $2.41 (we expect that the Street mean will go up for 2011E as well). We set our 2012E EPS estimate at $2.70 versus the Street estimate of $2.69."
Tractor Supply is trading at $44.96, gaining $1.17, or 2.67 percent as of 12:00 PM EST. FBR has a price target of $35 on them, raising it from $31.
Monday, November 1, 2010
FBR says be Cautious with PPL Corporation (NYSE:PPL)
Acknowledging they're well below street expectations for PPL Corporation (NYSE:PPL), FBR Capital still say it's a stock investors need to be cautious with them going forward. They maintain a "Market Perform" rating on them.
"We left the PPL earnings call with a slight case of indigestion. It would appear that hedges for 2011 and 2012 had more wiggle room than we assumed. No doubt, this will be the subject of numerous notes today. However, what we believe could be missing from the dialogue is the magnitude of the earnings contribution from the Kentucky utilities in 2011. This could be a key risk and we are well below street expectations in this respect. The basis for our view is enclosed. The new disclosure on the hedges, Kentucky earnings power, and other headwinds for next year leave us cautious on this stock. That said, we still see about $28 of intrinsic value for PPL based on our sum of the parts," said FBR.
FBR closed Friday at $26.86, gaining $0.42, or 1.59 percent. The price target was lowered to $28 a share.
"We left the PPL earnings call with a slight case of indigestion. It would appear that hedges for 2011 and 2012 had more wiggle room than we assumed. No doubt, this will be the subject of numerous notes today. However, what we believe could be missing from the dialogue is the magnitude of the earnings contribution from the Kentucky utilities in 2011. This could be a key risk and we are well below street expectations in this respect. The basis for our view is enclosed. The new disclosure on the hedges, Kentucky earnings power, and other headwinds for next year leave us cautious on this stock. That said, we still see about $28 of intrinsic value for PPL based on our sum of the parts," said FBR.
FBR closed Friday at $26.86, gaining $0.42, or 1.59 percent. The price target was lowered to $28 a share.
TECO Energy (NYSE:TE) Share Price Should Rise on Met Coal Market
FBR Capital raised their price target on TECO Energy, Inc. (NYSE:TE), citing an improved metallurgical coal market.
"Following a review of the quarter, we are raising our price target for TE to reflect an improvement in the met coal market and the benefit of cash proceeds from the DECA II sale. However, as TE stock trades near or above $18/share, we believe that it increasingly reflects an acquisition premium for TE Coal. We support this view with a detailed analysis enclosed performed in collaboration with the FBR Coal Team. Our base case valuation for TECO Coal reflects an $820 million enterprise value that incorporates strong upward momentum in pricing, offset by cost escalation. TE stock looks fairly valued to us but becomes stretched as it reaches our price target using current market multiples," FBR said.
FBR said they're maintaining their "Market Perform" rating on TECO, while raising the price target from $17 to $18 a share. TECO closed on Friday at $17.59, gaining $0.26, or 1.50 percent.
"Following a review of the quarter, we are raising our price target for TE to reflect an improvement in the met coal market and the benefit of cash proceeds from the DECA II sale. However, as TE stock trades near or above $18/share, we believe that it increasingly reflects an acquisition premium for TE Coal. We support this view with a detailed analysis enclosed performed in collaboration with the FBR Coal Team. Our base case valuation for TECO Coal reflects an $820 million enterprise value that incorporates strong upward momentum in pricing, offset by cost escalation. TE stock looks fairly valued to us but becomes stretched as it reaches our price target using current market multiples," FBR said.
FBR said they're maintaining their "Market Perform" rating on TECO, while raising the price target from $17 to $18 a share. TECO closed on Friday at $17.59, gaining $0.26, or 1.50 percent.
SolarWinds (NYSE:SWI) Still Has to Prove Themselves Says FBR Capital
FBR Capital noted after the recent quarterly report from SolarWinds, Inc. (NYSE:SWI) that they've made a strong step forward, but pointed to the fact that they must show they can do this on a sustainable level if they're going to make believers out of investors.
"Last night (Thursday October 28), SolarWinds delivered stronger-than-expected September results, which were a 'breath of fresh air for investors,' in our opinion, in light of the company’s recent track record of posting disappointing numbers. It appears after a rough few quarters that SolarWinds has fixed some of its execution/forecasting issues and is back on the road to recovery. While last night’s call/guidance was an important first step towards coming out of the investor penalty box, we believe SolarWinds remains a 'prove me' story until the company can show that sustainable growth and 50%
operating margins are attainable for the next 12 to 18 months," said FBR.
SolarWinds closed Friday at $18.15, gaining $0.17, or 0.95 percent. FBR has a price target of $21 on them, raising it from $20. They also maintain their "Outperform" on the solar company.
"Last night (Thursday October 28), SolarWinds delivered stronger-than-expected September results, which were a 'breath of fresh air for investors,' in our opinion, in light of the company’s recent track record of posting disappointing numbers. It appears after a rough few quarters that SolarWinds has fixed some of its execution/forecasting issues and is back on the road to recovery. While last night’s call/guidance was an important first step towards coming out of the investor penalty box, we believe SolarWinds remains a 'prove me' story until the company can show that sustainable growth and 50%
operating margins are attainable for the next 12 to 18 months," said FBR.
SolarWinds closed Friday at $18.15, gaining $0.17, or 0.95 percent. FBR has a price target of $21 on them, raising it from $20. They also maintain their "Outperform" on the solar company.
Monday, October 25, 2010
Patriot Coal (NYSE:PCX) Challenged by Rising Costs, Geological Conditions
Citing probably operational inconsistency based on rising costs and geological conditions, Patriot Coal (NYSE:PCX) had their "Market Perform" rating maintained on them by FBR Capital.
"We are lowering our 2011 and 2012 estimates on Patriot Coal by an average of 4% and keeping our 4Q10 estimates unchanged after the company announced lower-than-expected 3Q10 earnings and steam coal sales outlook yesterday. However, we boosted our 2011 met coal volume slightly as the company laid out its growth pipeline and highlighted multiple levers it can pull to achieve that growth. While we like the progress made by PCX as it builds out its met production and opportunistically locks in favorable contracts, we continue to be concerned about tough geological conditions and rising costs, which create operational choppiness," said FBR.
Patriot was down $0.18 Friday, closing at $12.81, losing 1.39 percent percent. FBR has a price target of $18 on them, increasing it from $16.
"We are lowering our 2011 and 2012 estimates on Patriot Coal by an average of 4% and keeping our 4Q10 estimates unchanged after the company announced lower-than-expected 3Q10 earnings and steam coal sales outlook yesterday. However, we boosted our 2011 met coal volume slightly as the company laid out its growth pipeline and highlighted multiple levers it can pull to achieve that growth. While we like the progress made by PCX as it builds out its met production and opportunistically locks in favorable contracts, we continue to be concerned about tough geological conditions and rising costs, which create operational choppiness," said FBR.
Patriot was down $0.18 Friday, closing at $12.81, losing 1.39 percent percent. FBR has a price target of $18 on them, increasing it from $16.
Thursday, October 21, 2010
Tractor Supply (Nasdaq:TSCO) Earnings Estimate Lowered by FBR Capital
After earnings results released from Tractor Supply (Nasdaq:TSCO), FBR Capital was underwhelmed with them, maintaining their "Underperform" on the company and lowering their earnings per share.
That is interesting because of the fairly strong quarter for Tractor Supply, who recorded an increase in sales of 46 percent, exceeding expectations.
FBR said, "What seemed to prevent an upward preannouncement of the quarter was a $0.045 beneficial swing from a LIFO credit for the period, which rendered EPS generally in line with expectations. Same-store sales were up 5% for the period, compared with our 5.5% estimate. October trends to date (first month of 4Q10E) are "comping nicely" versus the cool weather trends, which helped this time last year. Implied same-store sales guidance is 2%–4% for 4Q10E.
"We adjust our 2010E EPS estimate to $2.16 from $2.20; this compares with the former (pre 3Q) Street estimate of $2.08. For 2011E, we adjust our EPS estimate to $2.33 from $2.47, which is below the current Street mean estimate of $2.36."
Tractor Supply was trading at $37.17, down $0.82, or 2.16 percent at 12:57 PM EDT. FBR has a price target of $31 on them, raising it from $30 a share.
That is interesting because of the fairly strong quarter for Tractor Supply, who recorded an increase in sales of 46 percent, exceeding expectations.
FBR said, "What seemed to prevent an upward preannouncement of the quarter was a $0.045 beneficial swing from a LIFO credit for the period, which rendered EPS generally in line with expectations. Same-store sales were up 5% for the period, compared with our 5.5% estimate. October trends to date (first month of 4Q10E) are "comping nicely" versus the cool weather trends, which helped this time last year. Implied same-store sales guidance is 2%–4% for 4Q10E.
"We adjust our 2010E EPS estimate to $2.16 from $2.20; this compares with the former (pre 3Q) Street estimate of $2.08. For 2011E, we adjust our EPS estimate to $2.33 from $2.47, which is below the current Street mean estimate of $2.36."
Tractor Supply was trading at $37.17, down $0.82, or 2.16 percent at 12:57 PM EDT. FBR has a price target of $31 on them, raising it from $30 a share.
Peabody Energy (NYSE:BTU) Earnings Estimates Boosted by FBR Capital
FBR Capital reiterated their "Outperform" rating on Peabody Energy (NYSE:BTU), citing their strong performance in the third quarter. They also raised their earnings estimates for 2010-2012.
"This morning, we are increasing our 2010–2012 earnings estimates (EBITDA) on Peabody by about 2% after the company announced solid 3Q10 earnings, raised 2010 guidance, and sold additional coal at prices above expectations and in line with the forward curve. We continue to believe that Peabody is well positioned to benefit from growing seaborne demand and relatively less exposure to regulatory challenges domestically, where the company is also largely sold out for 2011. While the company's implied 4Q10 guidance may seem light, we remain focused on the key long-term catalysts for the company," said FBR.
"We are increasing our 2010 EPS/EBITDA estimates to $3.11/$1,884M, from
$2.99/$1,838M...We are also increasing our 2011 estimates to $4.00/$2,210M, from $3.83/$2,132M."
FBR has a price target of $61 on Peabody.
"This morning, we are increasing our 2010–2012 earnings estimates (EBITDA) on Peabody by about 2% after the company announced solid 3Q10 earnings, raised 2010 guidance, and sold additional coal at prices above expectations and in line with the forward curve. We continue to believe that Peabody is well positioned to benefit from growing seaborne demand and relatively less exposure to regulatory challenges domestically, where the company is also largely sold out for 2011. While the company's implied 4Q10 guidance may seem light, we remain focused on the key long-term catalysts for the company," said FBR.
"We are increasing our 2010 EPS/EBITDA estimates to $3.11/$1,884M, from
$2.99/$1,838M...We are also increasing our 2011 estimates to $4.00/$2,210M, from $3.83/$2,132M."
FBR has a price target of $61 on Peabody.
Wednesday, October 20, 2010
Massey Energy (NYSE:MEE) Could Be Put Up for Sale Says FBR Capital
FBR Capital said it is maintaining its rating on Massey Energy (NYSE:MEE) at "Outperform," citing reported board meetings dealing with strategic alternatives for the company, which if true, could possibly lead to a sale of the coal miner.
"Although Massey Energy (MEE) reports 3Q10 results after the close on October 26, 2010, The Wall Street Journal has published an article noting that MEE's board is in the process of announcing strategic alternatives, including sale, acquisition, or going private. The extreme pressure from MSHA, post-UBB, has clearly affected near-term margins and caused MEE's management to spend significant time on its own investigation. While the outcome of all the investigations is still unknown (although pieces have come out), we do believe there is a real takeout scenario for the company; and we have updated our takeout valuation to around $50.00 per share, based on recent $/ton transactions and a DCF—both of which are very simplistic. We do not believe that MEE can go private and increase leverage in its current form (asset sales needed); the best outcome, if a strategic review is being done, would be a sale scenario," said FBR.
Massey moved up on the supposition, closing Tuesday at $37.33, gaining $1.77, or 4.98 percent. FBR has a price target of $47 on Massey.
"Although Massey Energy (MEE) reports 3Q10 results after the close on October 26, 2010, The Wall Street Journal has published an article noting that MEE's board is in the process of announcing strategic alternatives, including sale, acquisition, or going private. The extreme pressure from MSHA, post-UBB, has clearly affected near-term margins and caused MEE's management to spend significant time on its own investigation. While the outcome of all the investigations is still unknown (although pieces have come out), we do believe there is a real takeout scenario for the company; and we have updated our takeout valuation to around $50.00 per share, based on recent $/ton transactions and a DCF—both of which are very simplistic. We do not believe that MEE can go private and increase leverage in its current form (asset sales needed); the best outcome, if a strategic review is being done, would be a sale scenario," said FBR.
Massey moved up on the supposition, closing Tuesday at $37.33, gaining $1.77, or 4.98 percent. FBR has a price target of $47 on Massey.
Tuesday, October 19, 2010
Cliffs' (NYSE:CLF) Empire Mine May Extend Past 2014
In a visit with Cliffs Natural Resources' management recently, FBR Capital said, among other things, that the life of the Empire mine may be extended past 2014.
FBR said, "Last week we visited Cliffs Natural Resources' management and came up with the impression that (a) management remains committed to its met coal business; (b) North American iron ore pricing should be finalized in 4Q10 and not in 3Q10; (c) about 80% of Asia Pacific iron ore business has now moved to spot-based pricing from quarterly contracts; and (d) there is a possibility of extending the mine life at Empire mine beyond the current 2014 planned closure."
FBR also raised its earnings per share estimates for the full year 2010, while lowering EPS for the third quarter of 2010.
"This morning we are increasing our 2010 EPS/EBITDA estimates to $7.40/$1,805 million from $7.08/$1,725 million, but are lowering our 3Q10 EPS/EBITDA estimates to $2.47/$572 million from $2.73/$619 million, primarily to reflect the delay in finalizing North American iron ore prices and about 9% higher 4Q10 iron ore prices in Asia Pacific, where about 80% of sales are now spot based and 20% quarterly contract based," said FBR.
Cliffs closed Monday at $66.17, dropping $1.37, or 2.03 percent. FBR has a price target of $81 on them.
FBR said, "Last week we visited Cliffs Natural Resources' management and came up with the impression that (a) management remains committed to its met coal business; (b) North American iron ore pricing should be finalized in 4Q10 and not in 3Q10; (c) about 80% of Asia Pacific iron ore business has now moved to spot-based pricing from quarterly contracts; and (d) there is a possibility of extending the mine life at Empire mine beyond the current 2014 planned closure."
FBR also raised its earnings per share estimates for the full year 2010, while lowering EPS for the third quarter of 2010.
"This morning we are increasing our 2010 EPS/EBITDA estimates to $7.40/$1,805 million from $7.08/$1,725 million, but are lowering our 3Q10 EPS/EBITDA estimates to $2.47/$572 million from $2.73/$619 million, primarily to reflect the delay in finalizing North American iron ore prices and about 9% higher 4Q10 iron ore prices in Asia Pacific, where about 80% of sales are now spot based and 20% quarterly contract based," said FBR.
Cliffs closed Monday at $66.17, dropping $1.37, or 2.03 percent. FBR has a price target of $81 on them.
Tuesday, October 12, 2010
PG&E Corp (NYSE:PCG) Keeps Rating on Settlement Progress
FBR Capital reiterated its "Outperform/Top Pick" on PG&E Corp (NYSE:PCG), citing progress toward a rate case settlement.
"It appears that PG&E's general rate case settlement discussions continue to be progressing well. In an email sent on October 7, PG&E's law department invites all parties to a settlement conference held on October 15, 2010 (this Friday). In this email, PG&E indicates that it is 'hopeful' that during this conference the parties "will successfully conclude negotiations and produce a settlement.
"In a subsequent email sent to the Administrative Law Judge and all parties, PG&E indicates that the next status report will be submitted no later than Monday, October 18, 2010," said FBR.
The company was also recently sued in connection to the San Bruno, California, that killed eight people.
PG&E closed Monday at $46.59, down $0.19, or 0.41 percent.
"It appears that PG&E's general rate case settlement discussions continue to be progressing well. In an email sent on October 7, PG&E's law department invites all parties to a settlement conference held on October 15, 2010 (this Friday). In this email, PG&E indicates that it is 'hopeful' that during this conference the parties "will successfully conclude negotiations and produce a settlement.
"In a subsequent email sent to the Administrative Law Judge and all parties, PG&E indicates that the next status report will be submitted no later than Monday, October 18, 2010," said FBR.
The company was also recently sued in connection to the San Bruno, California, that killed eight people.
PG&E closed Monday at $46.59, down $0.19, or 0.41 percent.
Monday, October 11, 2010
FBR Maintains Freeport's (NYSE:FCX) "Overweight/Top Pick", Citing Copper Prices
Freeport-McMoRan (NYSE:FCX) had its "Overweight/Top Pick" rating maintained on them by FBR Capital, citing what they believe is the sustainability of higher copper prices.
They see Freeport far exceeding consensus in the third quarter.
FBR said, "Despite the macro uncertainty throughout the summer months, we have remained confident in our long-held bullish copper thesis. In our opinion, there remains too much skepticism regarding the sustainability of high copper prices. We believe FCX's current valuation is discounting copper prices below $3 per pound versus the current price of $3.69 per pound. We believe investors need to start thinking 'outside the box' and consider the possibility of copper prices above $5 per pound for an extended period of time."
Like with most commodities going forward, prices will be determined by key emerging market players building up their infrastructure. How they go will be how commodity prices go, including copper.
It looks like emerging market growth should do well in the years ahead, so it's possible copper prices will be sustainable, although at what levels is debatable.
They see Freeport far exceeding consensus in the third quarter.
FBR said, "Despite the macro uncertainty throughout the summer months, we have remained confident in our long-held bullish copper thesis. In our opinion, there remains too much skepticism regarding the sustainability of high copper prices. We believe FCX's current valuation is discounting copper prices below $3 per pound versus the current price of $3.69 per pound. We believe investors need to start thinking 'outside the box' and consider the possibility of copper prices above $5 per pound for an extended period of time."
Like with most commodities going forward, prices will be determined by key emerging market players building up their infrastructure. How they go will be how commodity prices go, including copper.
It looks like emerging market growth should do well in the years ahead, so it's possible copper prices will be sustainable, although at what levels is debatable.
Tuesday, September 28, 2010
FBR Capital Maintains "Outperform/Top Pick" on Arch Coal (NYSE:ACI)
After taking part in the analyst day for Arch Coal (NYSE:ACI), FBR Capital liked what they heard and said they're maintaining their "Outperform/Top Pick" rating on the company.
FBR said, "We attended the Arch Coal analyst day and came away with conviction in our thesis that Arch Coal is in position for significant stock price appreciation and an FBR Top Pick. The company has been transformed over a long time to a low-cost, safe steam and met coal mining company. While the stock has not been rewarded for its underutilized capacity and short-term contracting strategy yet, we believe the company is on the cusp of generating solid rates of return above its cost of capital."
Arch closed Monday at $25.94, down $0.30, or 1.14 percent.
FBR has a price target of $37 on Arch Coal.
FBR said, "We attended the Arch Coal analyst day and came away with conviction in our thesis that Arch Coal is in position for significant stock price appreciation and an FBR Top Pick. The company has been transformed over a long time to a low-cost, safe steam and met coal mining company. While the stock has not been rewarded for its underutilized capacity and short-term contracting strategy yet, we believe the company is on the cusp of generating solid rates of return above its cost of capital."
Arch closed Monday at $25.94, down $0.30, or 1.14 percent.
FBR has a price target of $37 on Arch Coal.
Monday, September 27, 2010
FBR Likes PG&E (NYSE:PCG), SCANA (NYSE:SCG), Among Regulated Utilities
Among regulated utilities, FBR Capital says their top pick is Pacific Gas & Electric Co. (NYSE:PCG), and right behind them SCANA Corporation (NYSE:SCG).
Responding to questions on whether or not regulated utilities expensive to the S&P, FBR said, "A recurring question comes up during client meetings: Are regulated utilities expensive to the S&P? This question is particularly relevant now. Regulated utilities are trading at a forward P/E multiple of approximately 13x, a premium to the S&P trading at approximately 12x. This represents a relative P/E ratio for
utilities of 1.1x the S&P, which is high relative to the historical
average of 0.76x...Within the regulated group, we currently favor PG&E
(FBR Top Pick) and SCANA. These two companies have the best earnings
growth prospects, in our view, and are currently trading at a discount
to other regulated peers. They also happen to be among the least
interest-rate sensitive within our coverage universe."
PG&E closed the week at $45.82, gaining $0.60 on Friday, or 1.33 percent. SCANA closed at $40.45, up $0.78 on Friday, or 1.97 percent.
Volume for both companies was down in comparison to the 3-month daily average.
Responding to questions on whether or not regulated utilities expensive to the S&P, FBR said, "A recurring question comes up during client meetings: Are regulated utilities expensive to the S&P? This question is particularly relevant now. Regulated utilities are trading at a forward P/E multiple of approximately 13x, a premium to the S&P trading at approximately 12x. This represents a relative P/E ratio for
utilities of 1.1x the S&P, which is high relative to the historical
average of 0.76x...Within the regulated group, we currently favor PG&E
(FBR Top Pick) and SCANA. These two companies have the best earnings
growth prospects, in our view, and are currently trading at a discount
to other regulated peers. They also happen to be among the least
interest-rate sensitive within our coverage universe."
PG&E closed the week at $45.82, gaining $0.60 on Friday, or 1.33 percent. SCANA closed at $40.45, up $0.78 on Friday, or 1.97 percent.
Volume for both companies was down in comparison to the 3-month daily average.
Friday, September 17, 2010
FBR Reiterates "Outperform" on Massey (NYSE:MEE)
Massey Energy (NYSE:MEE) had its "Outperform" rating maintained on them by FBR Capital.
FBR said, "While MEE continues its struggle to put UBB behind it and to divert management's focus to operations, the process is taking a little bit longer than we expected. MEE continues to see MSHA enforcement and delays (in approval of ventilation plans) hurting the operational expectations, with the company missing targets.
"We are lowering our 2010 EPS/EBITDA estimates to $0.61/$458M, from $1.47/$574M, primarily to reflect $2.50/ton higher than earlier expected costs, 0.4MTs lower volumes, and lower realized pricing following the guidance update provided by MEE yesterday after the close. We are largely maintaining our 2011 and 2012 estimates."
FBR lowered its price target on Massey to $43.
FBR said, "While MEE continues its struggle to put UBB behind it and to divert management's focus to operations, the process is taking a little bit longer than we expected. MEE continues to see MSHA enforcement and delays (in approval of ventilation plans) hurting the operational expectations, with the company missing targets.
"We are lowering our 2010 EPS/EBITDA estimates to $0.61/$458M, from $1.47/$574M, primarily to reflect $2.50/ton higher than earlier expected costs, 0.4MTs lower volumes, and lower realized pricing following the guidance update provided by MEE yesterday after the close. We are largely maintaining our 2011 and 2012 estimates."
FBR lowered its price target on Massey to $43.
Wednesday, September 15, 2010
FBR (Nasdaq:FBCM) Maintains "Outperform" on Cliffs (NYSE:CLF)
FBR Capital (Nasdaq:FBCM) reiterated its "Outperform" on Cliffs Natural Resources (NYSE:CLF).
Recognizing coal production in America will decline for Cliffs, and the production costs will rise, FBR did lower its earnings per share estimates.
"We are lowering our 2010 EPS/EBITDA estimates on CLF to $7.08/$1,725M, from $7.52/$1,808M, primarily to reflect the company's reduced North American coal guidance, with lower volumes (by 0.6 MTs), lower realized pricing, and higher costs. The revised guidance is not comparable to previously announced guidance for pricing and costs as the company is now including the effect of the INR Energy acquisition. We are leaving our 2011 estimates largely unchanged for now," said FBR.
FBR has a price target of $81 on Cliffs.
Cliffs closed Tuesday at $63.18 a share, down $4.37, or 6.47 percent.
Recognizing coal production in America will decline for Cliffs, and the production costs will rise, FBR did lower its earnings per share estimates.
"We are lowering our 2010 EPS/EBITDA estimates on CLF to $7.08/$1,725M, from $7.52/$1,808M, primarily to reflect the company's reduced North American coal guidance, with lower volumes (by 0.6 MTs), lower realized pricing, and higher costs. The revised guidance is not comparable to previously announced guidance for pricing and costs as the company is now including the effect of the INR Energy acquisition. We are leaving our 2011 estimates largely unchanged for now," said FBR.
FBR has a price target of $81 on Cliffs.
Cliffs closed Tuesday at $63.18 a share, down $4.37, or 6.47 percent.
Monday, September 13, 2010
FBR on Transocean (NYSE:RIG), BP (NYSE:BP) Indemnity Battle
With the stock of Transocean (NYSE:RIG) discounting $6 to $7 billion in relationship to potential liabilities in the BP oil spill, FBR Capital said it's probably going to be far lower than that.
FBR stated, "The primary conclusions from our recent series of meetings with legal experts in the Gulf Coast are that Transocean's legal liability is likely to be far lower than the $6 billion to $7 billion presently discounted in the stock, but that the issues are incredibly complex. Transocean seems to be protected both by the law and by its contract with BP from bearing substantial liability for the spill. Under OPA, Transocean is not a responsible party for pollution emanating from the well."
Even so, the contract between BP and Transocean may not protect them, as there have been court cases in the past where indemnification has been disallowed. If BP chose to, they could attempt to legally penetrate Transocean’s indemnity.
The question is whether the financial incentive is worthwhile taking the action.
FBR concluded: "However, we do not believe that BP has enough financial incentive to pursue Transocean for contribution claiming gross negligence as this could open BP up to an additional $16 billion in fines under the Clean Water Act (CWA). With Transocean having a book value of $21 billion and a market capitalization of $18 billion, it could hand over the keys to BP and it would not offset the financial risk to BP that it might be found to be grossly negligent under the CWA."
In other words, it's highly unlikely BP and Transocean will ever go to court over this.
FBR stated, "The primary conclusions from our recent series of meetings with legal experts in the Gulf Coast are that Transocean's legal liability is likely to be far lower than the $6 billion to $7 billion presently discounted in the stock, but that the issues are incredibly complex. Transocean seems to be protected both by the law and by its contract with BP from bearing substantial liability for the spill. Under OPA, Transocean is not a responsible party for pollution emanating from the well."
Even so, the contract between BP and Transocean may not protect them, as there have been court cases in the past where indemnification has been disallowed. If BP chose to, they could attempt to legally penetrate Transocean’s indemnity.
The question is whether the financial incentive is worthwhile taking the action.
FBR concluded: "However, we do not believe that BP has enough financial incentive to pursue Transocean for contribution claiming gross negligence as this could open BP up to an additional $16 billion in fines under the Clean Water Act (CWA). With Transocean having a book value of $21 billion and a market capitalization of $18 billion, it could hand over the keys to BP and it would not offset the financial risk to BP that it might be found to be grossly negligent under the CWA."
In other words, it's highly unlikely BP and Transocean will ever go to court over this.
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