The Zacks Analyst Blog Highlights: Safeway, Patterson-UTI Energy, Nabors Industries, EPL Oil & Gas and Stone Energy

   The Zacks Analyst Blog Highlights: Safeway, Patterson-UTI Energy, Nabors
                  Industries, EPL Oil & Gas and Stone Energy

PR Newswire

CHICAGO, April 24, 2013

CHICAGO, April 24, 2013 /PRNewswire/ --Zacks.com announces the list of stocks
featured in the Analyst Blog. Every day the Zacks Equity Research analysts
discuss the latest news and events impacting stocks and the financial markets.
Stocks recently featured in the blog include Safeway Inc. (NYSE:SWY),
Patterson-UTI Energy Inc. (Nasdaq:PTEN), Nabors Industries Ltd. (NYSE:NBR),
EPL Oil & Gas Inc. (NYSE:EPL) and Stone Energy Corp. (NYSE:SGY).

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Here are highlights from Tuesday's Analyst Blog:

Earnings Preview: Safeway

Safeway Inc. (NYSE:SWY) is set to report its first-quarter 2013 results on Apr
25. Last quarter, this food and drug retailer posted a huge positive earnings
surprise of 23.68%. Let's see how things are shaping up prior to the
announcement.

Safeway's Growth Profile in the Last Quarter

Safeway's "Just for U" loyalty program was a positive catalyst driving
profitability and market share. Based on the loyalty program, management
expects ID sales to accelerate in 2013. In addition, the 2013 guidance, which
reflects the revival of strong business momentum and prospects of improved
execution, boosted investor enthusiasm. We believe that Safeway is set on a
high growth trajectory.

We remain concerned about the highly leveraged balance sheet of Safeway. The
company continues to operate with a high debt level of $5.2 billion at the end
of 2012 as against the year-ago figure of $4.6 billion. As a result, the
company's leverage stood at 1.8 at the end of 2012 compared with 1.2 at the
end of 2011.

Safeway also witnessed margin contraction due to higher expenses related to
the launch of its loyalty program and change in sales mix in the last reported
quarter. Notably, the company undertook cost saving initiatives to brace
margin pressure.

Earnings Whispers?

Our proven model does not conclusively suggest that Safeway is likely to beat
earnings estimate this quarter. This is because a stock needs to have a
positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) as well as a
Zacks Rank #1, 2 or 3 for this to happen. This, however, is not the case for
Safeway as seen below:

Zacks Earnings ESP: The Most Accurate Estimate stands at 35 cents and the
Zacks Consensus Estimate is at 36 cents. This comes to a difference of -2.78%.

Zacks Rank #1 (Strong Buy): Safeway carries a Zacks Rank #1 (Strong Buy).

Although the company has a Zacks Rank #1, a combination with negative ESP
makes surprise prediction difficult.

Patterson-UTI Likely to Top Estimates

We expect onshore contract driller, Patterson-UTI Energy Inc. (Nasdaq:PTEN),
to beat expectations when the company reports its first-quarter 2013 results
before the opening bell on Apr 25, 2013.

Why a Likely Positive Surprise?

Our proven model shows that Patterson-UTI is likely to beat earnings because
it has the right combination of two key factors:

Positive Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings
ESP: A Better Method), which represents the difference between the Most
Accurate estimate of 37 cents and the Zacks Consensus Estimate of 36 cents,
stands at +2.78%. This is a meaningful and leading indicator of a likely
positive earnings surprise for shares.

Zacks Rank #3 (Hold): The stocks with Zacks Rank #1 (Strong Buy), #2 (Buy) and
#3 (Hold) have a significantly higher chance of beating earnings. The
Sell-rated stocks (#4 and #5) should never be considered while going into an
earnings announcement.

The combination of Patterson-UTI's Zacks Rank #3 (Hold) and +2.78% ESP makes
us very confident of a positive earnings beat on Apr 25, 2013.

What is Driving the Better-than-Expected Earnings?

Patterson-UTI, the second-largest land drilling contractor of North America
after Nabors Industries Ltd. (NYSE:NBR), has a large and high-quality fleet of
drilling rigs. In particular, the company's technologically-advanced 'Apex'
rigs are the key to its success.

Moreover, Patterson-UTI's proprietary design makes the rigs move and drill
more efficiently than the regular ones and also makes operations safer. As
such, these rigs are better suited for the new demands of the exploration
business, therefore, command higher dayrates and utilization than rigs from
other land drillers.

Additionally, we appreciate Patterson-UTI's recent decision to retire 36 rigs
from its fleet. We expect the retirement to act as a positive step towards
balancing the market, given the extreme overcapacity caused by depressed
natural gas prices.

All these bullish points are reflected in the trailing four-quarter average
surprise of 16.41%, which was greatly supported by the 42.86% surprise in the
last-reported quarter. The outperformance in the last quarter was primarily
driven by the pressure pumping operations, which held up well against adverse
market conditions.

Other Stocks to Consider

Here are some other firms you may want to consider on the basis of our model,
which shows that they have the right combination of elements to post an
earnings beat this quarter:

  oEPL Oil & Gas Inc. (NYSE:EPL) has an earnings ESP of +12.50% and a Zacks
    Rank #1 (Strong Buy)
  oStone Energy Corp. (NYSE:SGY) has an earnings ESP of +2.86% and a Zacks
    Rank #1 (Strong Buy)

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