The Zacks Analyst Blog Highlights: McGraw-Hill Financial, Exxon Mobil,
Chevron, Matador Resources and Portfolio Recovery Associates
CHICAGO, Aug. 23, 2013
CHICAGO, Aug. 23, 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 the McGraw-Hill Financial Inc.
(NYSE:MHFI-Free Report), Exxon Mobil Corp. (NYSE:XOM-Free Report), Chevron
Corp. (NYSE:CVX-Free Report), Matador Resources Co. (NYSE:MTDR-Free Report)
and Portfolio Recovery Associates Inc. (Nasdaq:PRAA-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of
the Day pick for free.
Here are highlights from Thursday's Analyst Blog:
Crude Prices Fall Despite Supply Drop
The U.S. Energy Department's weekly inventory release showed that crude
stockpiles logged a larger-than-expected decline. The report further revealed
that within the 'refined products' category, gasoline stocks plunged, while
distillate supplies were up from the week-ago level. Meanwhile, refiners
unexpectedly scaled up their utilization rates by 1.6%.
Despite the supportive crude data from the U.S. government and the ongoing
unrest in Egypt that could destabilize the resource-rich Middle East and
further tighten the global supply picture, the commodity's price retreated
back below $104 a barrel. This was mainly on account of the minutes from the
Federal Reserve's July meeting that suggested that the U.S. may taper its
monetary stimulus later this year.
Traders have voiced concerns that Fed's shift away from the bond buying policy
may lead to dollar-denominated oil prices to increase in local-currency terms
in emerging markets, thus slowing growth.
About the Weekly Petroleum Status Report
The Energy Information Administration (EIA) Petroleum Status Report,
containing data of the previous week ending Friday, outlines information
regarding the weekly change in petroleum inventories held and produced by the
U.S., both locally and abroad.
The report provides an overview of the level of reserves and their movements,
thereby helping investors understand the demand/supply dynamics of petroleum
products. It is an indicator of current oil prices and volatility that affect
the businesses of the companies engaged in the oil and refining industry.
Analysis of the Data
Crude Oil: The federal government's EIA report revealed that crude inventories
fell by 1.43 million barrels for the week ending Aug 16, 2013, following a
decrease of 2.81 million barrels in the previous week.
The analysts surveyed by Platts – the energy information arm of McGraw-Hill
Financial Inc. (NYSE:MHFI-Free Report) – had expected crude stocks to go down
some 1 million barrels. An uptick in refinery processing rates and lower
domestic production led to the stockpile drawdown with the world's biggest oil
consumer even as imports rose.
In particular, crude inventories at the Cushing terminal in Oklahoma – the key
delivery hub for U.S. crude futures traded on the New York Mercantile Exchange
– were down 1.09 million barrels from the previous week's level to 37.43
million barrels. Stocks are currently at their lowest since Mar last year and
27.8% under the all-time high of 51.86 million barrels reached in Jan.
As a result of the seventh weekly inventory decline in 8 weeks, at 359.06
million barrels, current crude supplies are at their lowest level since Aug.
31, last year. It is now down slightly (by 0.4%) from the year-ago period,
though it is still close to the upper limit of the average for this time of
the year. The crude supply cover remained at 22.7 days – same as in the
previous week. In the year-ago period, the supply cover was 23.2 days.
Gasoline: Supplies of gasoline were down for the second time in as many weeks,
as domestic consumption strengthened and imports dropped. This was partially
offset by rise in production.
The 4.03 million barrels withdrawal – comfortably outpacing analysts'
projections for a 1.5 million-barrels decrease in supply level – took gasoline
stockpiles down to 218.40 million barrels. Notwithstanding this drawdown, the
existing inventory level of the most widely used petroleum product is 7.7%
higher than the year-earlier level and is in the top half of the average
Distillate: Distillate fuel supplies (including diesel and heating oil) were
up 871,000 barrels last week, just short of analysts' expectations for a 1
million barrels rise in inventory level. The increase in distillate fuel
stocks – the third in as many weeks – could be attributed to higher imports
At 129.35 million barrels, distillate supplies are 3.4% above the year-ago
level but is close to the lower limit of the average range for this time of
Refinery Rates: Refinery utilization edged up 1.6% from the prior week to
91.0%. The analysts were expecting the refinery run rate to decrease 0.5% to
Stocks to Consider
Despite concerns, with spot crude price staying strong – at around $104 a
barrel – brokerage analysts are likely to upgrade their forecasts on
oil-weighted companies and related support plays, leading to positive estimate
While all crude-focused stocks – including behemoths like Exxon Mobil Corp.
(NYSE:XOM-Free Report) and Chevron Corp. (NYSE:CVX-Free Report) – stand to
benefit from rising commodity prices, companies in the exploration and
production (E&P) sector are the best placed, as they will be able to extract
more value for their products.
In particular, one can look at Matador Resources Co. (NYSE:MTDR-Free Report) –
a small-cap, undervalued E&P player – as a good buying opportunity. Dallas
TX-based Matador Resources, sporting a Zacks Rank #1 (Strong Buy), with
current focus on the high-return Eagle Ford shale formation in South Texas, is
expected to witness earnings growth of 287% in 2013.
Moreover, a price-to-book (P/B) ratio of just 2.5 suggests that the stock is
still undervalued. In fact, shares of Matador Resources have risen from $12.78
to $17.29 since we recommended it on Crude Prices Surge: 3 Stocks to Buy Now
on Jul 22.
Portfolio Recovery Increases Credit Facility
Portfolio Recovery Associates Inc. (Nasdaq:PRAA-Free Report), a leading
financial services company recently increased its lenders' domestic revolving
credit commitments by $35.5 million to $633 million. On Dec 19, 2012,
Portfolio Recovery entered into a $597.5 million Credit Agreement with a group
As per the amendment, three new lenders viz. Bank of Hampton Roads, Heritage
Bank and Union First Market were added. Moreover, three other lenders
associated with the agreement, made adjustments to their credit commitments.
The aggregate credit facility with a principal amount of $633 million now
consists of a fully-funded term loan, a domestic revolving credit facility and
a multi-currency revolving credit facility. The term loan is worth $197.5
million while domestic revolving credit facility is of $415.5 million, which
can be fully drawn. The amount of multi-currency credit facility is $20
million, all of which is available for withdrawal. All the three components
of the credit facility under the Credit Agreement are expected to mature on
Dec 19, 2017.
Additionally last week Portfolio Recovery sold its $287.5 million convertible
senior notes that were scheduled to mature in 2020. We believe that this
amendment in the credit facility coupled with closing of the senior notes will
strengthen the financial position of Portfolio Recovery and assist it to grasp
any forthcoming opportunity for growth.
Portfolio Recovery seems promising with a Zacks Rank #2 (Buy).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of
the Day pick for free.
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