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5 HOT SOFTWARE STOCKS
The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks decreased by 29 billion cubic feet for the week ending March 30. The winter heating season, when natural gas demand typically reaches its peak, ended last week.
Analysts were expecting a storage withdrawal of around 29 billion cubic feet. The five-year average for the week is a withdrawal of 28 billion cubic feet, and last year’s storage increase for the week totaled 2 billion cubic feet. Natural gas inventories fell by 63 billion cubic feet in the week ending March 23.
Natural gas futures for May delivery traded down about 0.8% in advance of the EIA’s report, at around $2.69 per million BTUs, and slipped to around $2.67 shortly after the report was released.
The forecast for overall natural gas demand next week moves back into the “high” range as cooler weather lingers over the northern and eastern states. Cooler temperatures are expected across much of the country with only the South seeing mild and warmer weather.
Total U.S. stockpiles fell week over week to 34% below last year’s level and are now 20.4% below the five-year average.
The EIA reported that U.S. working stocks of natural gas totaled about 1.354 trillion cubic feet at the end of last week, around 347 billion cubic feet below the five-year average of 1.701 trillion cubic feet and 697 billion cubic feet below last year’s total for the same period. Working gas in storage totaled 2.051 trillion cubic feet for the same period a year ago.
Here’s how share prices of the largest U.S. natural gas producers reacted to this latest report:
Exxon Mobil Corp. (NYSE: XOM), the country’s largest producer of natural gas, traded up about 0.9%, at $75.54 in a 52-week range of $72.16 to $89.30.
Chesapeake Energy Corp. (NYSE: CHK) traded up about 2.9%, at $3.00 in a 52-week range of $2.53 to $6.40.
EOG Resources Inc. (NYSE: EOG) traded down about 0.1% at $104.09. The 52-week range is $81.99 to $119.00.
Also, the United States Natural Gas ETF (NYSEARCA: UNG) traded down about 1.5%, at $21.99 in a 52-week range of $20.40 to $31.72.
United Steel Corp. (NYSE: X) has delivered a major interruption for its investors hoping to win off of more protection for U.S. steel makers and for needing steel for endless infrastructure projects. The steel giant was supposed to be profitable but delivered a loss to shareholders in its quarterly report. The reaction has literally removed one-quarter of U.S. Steel’s market value and is bleeding over into multiple steel and advanced metals stocks.
What investors have to be concerned with here is that U.S. Steel historically has been a leader in steel. Now it has diminished in its importance, as its prominence has fallen while other companies have become more important. Steel stocks had been major beneficiaries of the so-called Trump bump due to tariff and infrastructure hopes. To prove the point further: U.S. Steel used to be a member of the Dow Jones Industrial Average and a member of the S&P 500. That was then.A glance at other metals earnings shows the story of U.S. Steel seems to be more company-specific rather than sectorwide. That may help the other steel companies and advanced metals companies from falling into what in decades past might have been a sectorwide earnings black hole.U.S. Steel was supposed to report earnings of $0.34 per share, but its adjusted loss came in at $0.83 per share. The net loss was even worse, at $180 million, or $1.03 per share. The company also generated negative operating cash flow of $135 million for first quarter of 2017 that was mostly tied to an investment in working capital in the quarter.Some items can be attributed to this awful report, but revenues of $2.72 billion were far shy of the $2.93 billion that was expected. While the sales for the first quarter of 2017 were far less than expected, they were still higher than the $2.65 billion in the fourth quarter of 2016 and looked even better against the $2.341 billion from the first quarter of 2016.
It will next to impossible for U.S. Steel to regain its lost ground from the first quarter as well. The company now expects that full 2017 earnings will be closer to $1.50 per share. Analysts on average were calling for $3.05 per share.
U.S. Steel shares were last seen trading down 24.4% at $23.53 on almost 49 million shares approaching 11:00 a.m. Eastern Time on Wednesday. That is already 30 million shares more than a full day’s average trading volume. U.S. Steel has a 52-week range of $12.77 to $41.83. U.S. Steel’s market cap is now down to about $4 billion.Here is a look at how the shadow is bleeding over on other U.S. steel players, but not than the international giants located outside of the United States.AK Steel Holding Corp. (NYSE: AKS) was actually up after analyst commentary on its own post-earnings reaction. It was last seen trading up 2.6% at $6.56, after trading as high as $6.57 earlier. AK Steel has a 52-week trading range of $3.31 to $11.39, with a consensus analyst price target of $9.61. The company has a total market cap of $2 billion.Commercial Metals Co. (NYSE: CMC) was up 0.7% at $19.13 on Wednesday morning, and trading volume was light. It has a consensus price target of $21.11 and a market cap of $2.2 billion. The stock trades within a 52-week range of $14.58 to $24.64
COMPLETES MOVE TO USA
GE SIGNS DEAL WITH IRAQ
APRIL NEWSLETTER 3
Broadcom, which was a U.S. company until it was bought in 2016 by Singapore's Avago, had announced its plan to redomicile on Nov. 2, days before making its first offer for Qualcomm.
The company said it exchanged all shares of Broadcom Ltd to newly issued stock of Broadcom Inc on a one-for-one basis and that its stock would continue to trade under the same ticker.
Broadcom's existing co-headquarters in San Jose, California will become its sole headquarters, the company said.
The move to the United States could allow Broadcom to buy U.S. companies without coming under the scrutiny of the Committee on Foreign Investment in the United States (CFIUS), which has the power to stop deals that could harm national security.
Broadcom's shares were up 0.4 percent at $237.97 in after hours tradin
It is no secret that investors were looking for some sort of safety in March. After all, there were growing fears of a trade war, ongoing issues in Korea, increased equity volatility and a decline in cryptocurrencies. Even interest rate pressures were there before the flight to quality. All this adds up to quite a story for gold investors.
Gold is often considered the ultimate safe haven during times of uncertainty. It remains debatable whether that should still be the case, but for a couple thousand years or more of history gold has defined wealth and been a store of value.
24/7 Wall St. just saw how the equity outflows were quite high in the second half of March, and it looks like gold-backed exchange traded funds (ETFs) and similar instruments were the beneficiaries. RBC Capital Markets recently took a positive stance on gold during uncertain times in the form of its top gold-mining stock picks.
The World Gold Council has released its March inflows and outflows data on gold-backed funds, as well as the year-to-date figures. In prior reports, the council expressed its reasons why cryptocurrencies are not a real substitution for gold.
It turns out that global gold-backed ETFs added a total of 22.5 tonnes of gold during March. This was an increase to 2,415 tonnes, worth some $102.8 billion. The council’s preliminary statement said:
Inflows in the US and China reflect broader market uncertainty related in part to geopolitical risks such as global trade tensions in March – more broadly, North American-listed funds have accounted for 85% of total net inflows so far this year… A weaker US dollar and stock market performance also drove US investors to gold, which has been one of the year’s best performing assets, having rallied 2.5% through Q1.
More specifically, North American funds accounted for 85% of total net inflows this year, at about 27.9 tonnes worth $1.2 billion. The SPDR Gold Shares (NYSE: GLD) and the iShares Gold Trust (NYSE: IAU) were the primary drivers of North American and global inflows. In March alone, these accumulated 15.1 tonnes ($642 million, 1.8% of assets) and 5.4 tonnes ($230 million, or 2% of assets), respectively.
There was a bit of a different move in Europe, with outflows of 1.2 tonnes. The council’s March notes showed that European outflows were mostly led by U.K.-listed gold-back funds and that those outflows were driven by a stronger pound sterling and higher certainty that an agreement with Europe on Brexit will be met.
A recovery in the stock market from Wednesday’s lows has taken some of the strength out of gold. On Thursday morning, gold was last seen down almost 0.4% at $1,325 per ounce. That price looked as though it was ready to hit $1,350 per ounce in the wee hours of Wednesday morning.
After starting out the year absolutely on fire, the software segment did slow down as volatility, valuations and just plain profit-taking ate into some of the huge early gains. The pullback in some of the top companies over the past 60 days is providing more aggressive accounts some much nicer entry points. With earnings reports right around the corner, now may be a good time to add some shares of the industry leaders.
A new and very in-depth Baird report on software sector notes that while the stocks in the firm’s coverage list did pull back sharply, they still ended the quarter up a stunning 18%. The analysts remain cautiously optimistic and noted this:
The hot start to 2018 leaves software investors pondering where the sector goes from here. We believe fundamentals entering the first quarter 2018 reporting season remain robust, but acknowledge strong performance and prior multiple expansion could cause sideways trading in upcoming months.
With that cautious stance in mind, we screened the Baird software coverage list for larger capitalization stocks rated Outperform and found five that still look like solid plays for aggressive accounts.
This high-profile old-school software company has posted outstanding earnings. Adobe Systems Inc. (NASDAQ: ADBE) operates in three segments. The Digital Media segment provides tools and solutions that enable individuals, small and medium businesses, and enterprises to create, publish, promote and monetize their digital content. The other segments are Digital Marketing and Print and Publishing.
Top Wall Street analysts see the company benefiting from artificial intelligence, predictive analytics, automation bots, speech recognition and natural language processing and image recognition. Some on Wall Street see earnings per share increasing a solid 30% or more for 2018.
The Baird team feels the company deserves a premium multiple to its peers due to Adobe’s strong competitive position in the creative space and above-average growth prospects.
The Baird price target for the shares is $240, and the Wall Street consensus target is $248.19. The stock closed Thursday at $223.54 a share.
This top stock has traded sideways for almost a year and looks ready to break out and go higher. Autodesk Inc. (NASDAQ: ADSK) is a design software and services company providing a range of solutions for customers in architectural, engineering, construction, manufacturing, geospatial mapping and digital media markets.
The company sells 2D horizontal design solutions like AutoCAD and AutoCAD LT 3D model-based design solutions that are widely used design software tools. Autodesk products allow users to simulate and analyze real-world performance by creating digital prototypes early in the design process.
Baird has a $145 price target, and the consensus target is $145.81. The shares closed trading on Thursday at $128.02.
This top company reported solid fiscal 2018 second-quarter results as billings drastically improved, and Jefferies recently upgraded it to Buy. Salesforce.com Inc. (NYSE: CRM) provides enterprise cloud computing solutions, with a focus on customer relationship management to various businesses and industries worldwide.
It offers enterprise cloud computing applications and platform services, including Sales Cloud that enables companies to store data, monitor leads and progress, forecast opportunities, gain insights through relationship intelligence and collaborate around sales on desktop and mobile devices.
The company also provides Service Cloud, which enables companies to deliver personalized customer service and support, as well as connect their service agents with customers on various devices; and Marketing Cloud, which enables companies to plan, personalize and optimize customer interactions.
The $135 Baird price target is less than the $137.43 consensus price objective. The stock closed on Thursday at $119.04.
This company has come into the spotlight as a potential takeover candidate. Citrix Systems Inc. (NASDAQ: CTXS) is leading the transition to software-defining the workplace, uniting virtualization, mobility management, networking and SaaS solutions to enable new ways for businesses and people to work better.
Citrix solutions power business mobility through secure, mobile workspaces that provide people with instant access to apps, desktops, data and communications on any device, over any network and cloud. Strategic mergers and acquisitions and internal development have expanded Citrix’s addressable markets beyond access to legacy Windows applications to include desktop and server virtualization, team collaboration and application networking.
Baird has set its price objective at $100. The consensus figure is $92.59, and shares closed trading most recently at $92.71.
This red-hot stock has had an outstanding year. ServiceNow Inc. (NYSE: NOW) develops and sells a hosted, subscription-based suite of services designed to automate various IT department functions, such as help desk, operations management and change/release management.
The company also sells a number of applications that automate various self-service-related applications outside of the IT department, such as HR onboarding, facilities requests and governance, risk and compliance.
The Baird price target is $190. The consensus target is $171.74, and shares closed at $165.77.
McDonald’s Corp. (NYSE: MCD) reported its first-quarter financial results before the markets opened on Tuesday and saw its shares reach for a new all-time high. Although revenues took a step back from last year, comparable sales and earnings were able to drive shares higher in Tuesday’s premarket.
The company posted $1.47 in earnings per share (EPS) and $5.68 billion in revenue, which compares with consensus estimates from Thomson Reuters of $1.33 in EPS and revenue of $5.51 billion. In the same period of last year, McDonald’s said it had EPS of $1.23 and $5.9 billion in revenue.
Global comparable sales increased 4.0%, reflecting positive comparable sales in all segments. In the United States, first-quarter comparable sales increased 1.7% and the International Lead segment increased 2.8%, each building on strong prior-year results that benefited from the launch of All Day Breakfast. Comparable sales for the High Growth segment increased 3.8%, led by China. Foundational Markets & Corporate segment comps rose 10.7%.
McDonald’s returned $1.6 billion to shareholders through share repurchases and dividends, in connection with its target to return between $22 billion and $24 billion to shareholders for the three-year period ending 2019.
Steve Easterbrook, McDonald’s president and CEO, commented:
Our efforts to build a better McDonald’s are yielding meaningful results with continued positive momentum and a strong start to 2017 that includes positive comparable sales across all segments, higher global guest counts and enhanced profitability. There’s a sense of urgency across the business as we take actions to retain existing customers, regain lapsed customers and convert casual customers to committed customers. We’re continuing to build a more personalized and enjoyable visit, which delights customers with the taste and quality of our food and offers the highest level of convenience, in order to gain traffic in an increasingly competitive industry and deliver profitable growth for our System and shareholders.
Shares of McDonald’s closed Monday up 0.6% at $134.23, with a consensus analyst price target of $135.70 and a 52-week trading range of $110.33 to $134.76. Following the release of the earnings report, the stock was up 2.5% at $137.60 in early trading indications on Tuesday.
Baker Hughes and General Electric signed a contract with Iraq's government on Monday to process natural gas extracted alongside crude oil at two fields in southern Iraq, the oil ministry said.
The plan was first announced by GE last July and is part of Iraq's efforts to stop flaring gas associated with oil by 2021. Iraq continues to flare some of this gas because it lacks the facilities to process it into fuel for local consumption or exports.
Gas flaring costs nearly $2.5 billion in lost revenue for the government and would be sufficient to meet most of needs for gas‐based power generation, according to the World Bank.
The contract with Baker Hughes and GE provides for processing the gas at the Nassiriya, Al Gharraf oilfields.
It is the second contract signed by Iraq to process gas associated with oil, after one with U.S. energy firm Orion in January.
Iraq's production of associated gas is expected to grow as the country increases its oil output capacity.
The Iraqi cabinet on Sunday approved a plan to raise the nation's crude oil output capacity to 6.5 million barrels per day by 2022, from about 5 million bpd now.
The country is currently producing about 4.4 million bpd, below its capacity, in line with an agreement between the 14-member Organization of Petroleum Exporting Countries and other exporters including Russia to cut supply to boost oil prices.
OPEC's second-largest producer, after Saudi Arabia, Iraq plans to award oil and gas exploration and development contracts in 11 new blocks on April 15.
The Iraqi government depends on oil and gas sales for about 95 percent of its income.