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As the cereal business continues to suffer, so does the Kellogg Co. (NYSE: K) workforce. Several hundred people were laid off as the company shutters some of its shipping centers. The most recently layoffs were in North Carolina and Texas.
Kellogg’s has recently tried to make its delivery infrastructure more efficient. Under a program dubbed Project K, snack food delivery will be moved from “direct to store” to “direct to warehouse” delivery. The company started the process in 2013 and expects to save $470 million a year via the changes. The savings are all expected to be realized by next year.
Morning eating habits have rotated away from corn flakes and sugary cereals. Healthier choices and fast-food breakfasts have robbed Kellogg’s of some of its customers. In the most recent quarter, revenue dropped from $3.4 billion in the quarter a year ago to $3.26 billion. Net income rose to $262 million from $175 million. Cost cuts were critical to the improvement. So, as sales shrink, Kellogg’s will have to find more ways to save money.Kellogg’s road to some modest level of growth may come from product diversification. It recently launched a new set of Pop Tarts with Jolly Rancher. Candy-flavored breakfast is the latest breakfast from Kellogg’s.That may not be enough. Kellogg’s shares are down 3% this year to $71.68 apiece.
MAY NEWSLETTER 3
Union reps can no longer join safety inspections of nonunion shops because a recent order from the Trump administration nixing the policy which was established under President Obama. The prior policy allowed the employees at work sites who were not part of a union to select whom they wanted to join inspectors from the Occupational Safety and Health Admin, during workplace safety checkups. Even union reps could be selected. Employers argued that the policy opened the door to unions activists accompanying OSHA inspectors, a subtle attempt at organizing.
Gay workers will eventually be classified as protected from job discrimination under the 1964 Civil Rights Act. Several courts have recently issued rulings on the matter that conflict with one another, raising the odds that the Supreme Court will soon take up the matter. Given the current makeup and recent decisions the high court will probably rule that gay workers are covered by the 1964 law. Note that some regulators already view sexual orientation as covered by antidiscrimination law. The Equal Employment Opportunity Comm has levied fines on employers in recent years for alleged bias in hiring practices or worker treatment.
Comcast's new wireless service is poised to shake up the cellular industry. The cable giant is renting airwaves on Verizon's national 4G LTE network, which also planning to use it 16 million Wi-Fi hotspots to carry data traffic. Comcast will first pitch the service to existing cable , web and landline phone users. The idea:Hang on to customers by offering cell service as a low cost add on.
Existing carriers will fell the heat from the new, low priced wireless offering. Comcast's unlimited data plan starts at $45 per line per month for Comcast customers who pay for the priciest cable services. That price undercuts offerings from Verizon, AT&T and other big cell carriers, which will feel pressured to cut their plan prices and offer more benefits, such as free streaming TV channels, to keep their customers
KELLOGG IN DECLINE
The futures are once again looking lower this Thursday morning as Wall Street grapples with trade and tariff issues. Despite outstanding earnings reports for the first quarter, it seems as though every move higher in the market is met with renewed selling. While the Federal Reserve did not raise interest rates on Wednesday, it looks like a lock the gradual increases will continue. It has become clear that the multiyear trend of buying pullbacks is now more vulnerable to sellers, volatility and each major news headline. Many investors are finding it harder to decide how they want their assets positioned for the longer term.
24/7 Wall St. reviews dozens of analyst research reports each day of the week to find new investing ideas and trading ideas for our readers. Some of the top analyst reports cover stocks to buy. Other analyst calls cover stocks to sell or to avoid.
Additional color and commentary has also been added on some of these daily analyst calls. The consensus analyst price target data are from the Thomson Reuters sell-side research service.
These were the top analyst upgrades, downgrades and other research calls from Thursday, May 3, 2018.
Andeavor (NYSE: ANDV) was raised to Buy from Hold at Jefferies. The company recently was purchased by Marathon Petroleum in a massive $23.3 billion deal. Andeavor’s 52-week trading range is $78.35 to $144.08. The Wall Street consensus price target for the shares is $135.17. The stock closed above that level on Wednesday at $138.58.
Clean Harbors Inc. (NYSE: CLH) was raised to Outperform from Perform at Baird with a $61 price target. The analysts at Canaccord Genuity also raised the stock to Buy from Neutral, and they have a $60 price target. That compares with the consensus target of $57.70. The 52-week trading range is $44.75 to $61.62. Both upgrades come on the back of a solid earnings report. The shares closed Wednesday at $49.18.
Clearwater Paper Corp. (NYSE: CLW) was raised to Outperform from Perform at RBC with a $30 price target. That compares with the consensus target of $46.75. The 52-week trading range is $22.51 to $50.60. The stock closed Wednesday at $23.
Discovery Inc. (NASDAQ: DISCA) was raised to Overweight from Equal Weight at JPMorgan, which also has a $29 price target. The Wall Street consensus target is $26.77. The stock has traded in a 52-week range of $15.99 to $29.72. The shares closed Wednesday at $23.58.
EnLink Midstream LLC (NYSE: ENLC) was raised to Outperform from Perform at RBC, which has its price target set at $22. The consensus target price is $17.50. The shares have traded in a 52-week range of $13.80 to $20. The stock closed Wednesday at $15.20.
Esperion Therapeutics Inc. (NASDAQ: ESPR) was downgraded to Underweight from Equal Weight at JPMorgan, which has a price objective of $41. That compares with the consensus target of $100.54. The stock has traded in a 52-week range of $30.95 to $82.68. The shares were absolutely crushed on Wednesday as Phase 3 results for one of the company’s key drugs showed safety results issues. The shares closed at $45.75, down a stunning 35% on the day.
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Estee Lauder Companies Inc. (NYSE: EL) was downgraded to Hold from Buy at Jefferies with a $145 price target. That compares with the consensus target of $154.54. The 52-week trading range is $90.77 to $153.88. The stock closed trading on Wednesday at $132.59.
Hologic Inc. (NASDAQ: HOLX) was downgraded to Hold from Buy at Canaccord Genuity, with a $39 price target. The consensus price target is $47.41, and the 52-week trading range is $35.33 to $46.80. The stock ended trading on Wednesday at $39.94.
Laredo Petroleum Inc. (NYSE: LPI) was downgraded to Neutral from Buy at Baird, with at $10 price target. The 52-week trading range is $7.41 to $13.46. The consensus price target is set at $11.80. The shares closed Wednesday at $10.92.
Nvidia Corp. (NASDAQ: NVDA) was raised to Overweight from Equal Weight at Barclays, which has a $280 price objective. That compares with the consensus target of $149.58. The 52-week trading range for the red-hot semiconductor company is $102.31 to $254.50. The stock closed trading on Wednesday at $226.31.
NVent Electric PLC (NASDAQ: NVT) was rated at New Market Perform at Oppenheimer. The 52-week trading range is $22.05 to $24.00. There are no consensus price targets as this was a new deal that recently came to market. The shares closed Wednesday at $22.76.
Marathon Petroleum Corp. (NYSE: MPC) was raised to Buy from Neutral at Jefferies after the huge purchase of Andeavor. The 52-week trading range is $49.30 to $83.27. The consensus price target is posted at $86.56. The shares closed Wednesday at $75.64. Clearly, the Jefferies team likes both sides of this deal.
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Pentair PLC (NYSE: PNR) was downgraded to Sector Perform from Outperform at RBC with a $49 price target. That compares with the posted consensus target of $70.85. The 52-week trading range for the shares is $39.71 to $50.26. The stock closed trading on Wednesday at $45.42.
TC Pipelines L.P. (NYSE: TCP) was downgraded to Sector Perform from Outperform at RBC. The analysts have a $32 price target, and the consensus target price is $41.75. The shares have traded in a 52-week range of $24.71 to $61.74. The stock closed trading on Wednesday at $25.14.
Terraform Power Inc. (NASDAQ: TERP) was raised to Overweight from Equal Weight at JPMorgan, and they have a $13 price target. The consensus price objective is set at $13.08. The 52-week trading range is $10.02 to $14.20. The stock ended trading on Wednesday at $10.89.
Yum! Brands Inc. (NYSE: YUM) was raised to Outperform from Market Perform at Baird, with a $94 price target. The consensus target is set at $86. The 52-week trading range is $67.91 to $88.07. The stock closed trading on Wednesday at $80.20.
In case you missed it, here are Wednesday’s top analyst upgrades and downgrades. They included Alcoa, Apple, Crocs, NuVasive, Texas Roadhouse, Under Armor and more.
Australian airline Qantas International announced Tuesday that it plans to retire the last six of its 747-400s by the end of 2020, ahead of a previous schedule to phase out the Boeing Co. (NYSE: BA) jumbo jets by 2022 or 2023. At the same time, Qantas said it would purchase six new 787-9s to bring its fleet of Dreamliners to 14 jets by the end of 2020.
In March, Qantas flew a 787-9 from the Western Australia city of Perth to London’s Heathrow on a non-stop flight of around 17 hours. The Dreamliner has better economics and a longer range than the 747-400 and Qantas plans to open additional long-distance routes to the Americas, Asia, South Africa and Europe using the new planes.
Qantas CEO Alan Joyce said:
This really is the end of one era and the start of another. The jumbo has been the backbone of Qantas International for more than 40 years and we’ve flown almost every type that Boeing built. It’s fitting that its retirement is going to coincide with our centenary in 2020. Over the years, each new version of the 747 allowed Qantas to fly further and improve what we offered passengers. The Dreamliners are now doing the same thing.
According to the airline, it now has four Dreamliners in service and four more expected to arrive by the end of this year. The additional six are expected to arrive between late 2019 and mid-to-late 2020.
Qantas decided in 2016 not to order any more Airbus superjumbo A380s to add to its fleet of 12 of these massive aircraft. Again, the economics of twin-engine, wide-body planes prevail over their four-engine ancestors.
Although the airline has not ordered any Airbus A350 jets yet, it is keeping an eye on the Airbus A350-900 passenger jet recently entered into service by Singapore Airlines. Qantas has been expected to choose between the A350 and the coming 777X from Boeing for more long-range flights sometime in 2019 in time to introduce new flights between eastern Australia and London by 2022.
With everything seemingly looking up for the energy sector, there could very easily be a geopolitical item right around the corner that could move the price of oil higher.
The current administration has already stated its dislike of the Iran deal forged under President Obama in no uncertain terms. Monday, the stakes were pressed even higher after the Israeli Prime Minister said that captured Iranian documents indicated that the country has allegedly been lying about its nuclear program for years.
All of this makes Jefferies starting coverage of four top exploration and production companies extremely timely. In new research report, analyst Thomas Hughes picks up the coverage:
Thomas Hughes assumes coverage preferring those companies with greater exposure to oil as he sees potential for 2018 US oil growth to underwhelm versus expectations; he is forecasting US shale oil growth to be ~590 million barrels per day between the fourth quarter of 2017 to 2018, roughly two-thirds of what it was in 2017 (~900 million barrels per day) driven by: 2018 base declines (resulting from the 2016/2017 investment cycle); current operator climate towards capital discipline (capex is up ~10% yoy while the commodity is up 24% (first quartere 2018 versus 2017); and an increasing level of operational bottlenecks which are becoming more prevalent as the cycle matures.
Of the four companies Jefferies assumes the coverage on, three are rated Buy and one is rated Hold.
This company has very large exposure to crude oil. Continental Resources Inc. (NYSE: CLR) is primarily a producer of onshore U.S. oil and has positioned itself in two growing hydrocarbon discoveries in the country: 1) the Bakken oil play in Montana and North Dakota, and 2) the SCOOP/STACK in Oklahoma, giving the company good growth opportunities for years to come.
Many on Wall Street feel that the company’s investment thesis is virtually unmatched. Investors get core Permian-like acreage at a non-Permian valuation. Of greatest importance, Continental is one of few diversified large-cap stocks that offers investors exposure to low-cost oil outside of the Permian. With some anticipated growing pains in the Permian, diversification is important in the high-quality peer class.
The analysts cited the company as a favorite and noted this:
Driven by significantly better 2016 and 2017 results when utilizing high intensity completions, an unhedged 2018 and 2019 oil production profile which we estimate generates a 5.4% and 5.6% free cash flow yield at the strip, and an expansive low-cost oily resource inventory which provides decades of drilling locations, we are adding the company to our Top Picks list.
The Jefferies price target on the shares is $78, and the Wall Street consensus target was last seen at $62.37. The shares traded early Wednesday at $66.20.
This company has one of the best production mixes of the stocks rated Buy, with oil, natural gas and the balance in natural gas liquids (NGLs). Newfield Exploration Co. (NYSE: NFX) is an independent energy company engaged in exploration, development and production of crude oil, natural gas and NGLs. It is focused on North American resource plays, and the company’s principal areas of operation include the Mid-Continent, the Rocky Mountains and onshore Texas. In addition, Newfield has oil developments offshore China.
The analysts shared this in the research report:
Since the fourth quarter of 2017, STACK exposed names have sold off massively, underperforming our coverage’s median return by ~11% year to date. The market’s buckshot approach to STACK valuation has created an opportunity in Newfield, where we see 2017 wells outperforming 2014-2016 wells. As investors look for non-Permian exposure, the company maintains sufficient STACK inventory that makes a spacing concern driven sell-off puzzling. The company is in show-me mode and should rerate with execution.
Jefferies has set its price target at $36, while the consensus target is $36.34. The shares were last seen trading at $28.30 apiece.
This smaller independent could be an outstanding play for more aggressive accounts. Oasis Petroleum Inc. (NYSE: OAS) is an independent exploration and production company that focuses on the acquisition and development of unconventional oil and natural gas resources in the North Dakota and Montana regions of the Williston Basin. Its principal projects are located in West Williston and East Nesson.
With 518,000 net acres across North Dakota and Montana, Oasis had 305 million barrels of oil equivalent per day of proved reserves at year’s end 2016 that were 62% developed and 78% liquids. The company also has identified about 2,200 gross operated locations targeting the Middle Bakken and Three Forks formations.
The analyst is very positive on valuations, and noted this:
Despite acquiring a Delaware asset in 2017, we still estimate the company trades at a ~0.5x discount to the group on 2019 EBITDA and at an even greater discount to Delaware pure-plays. With Oasis self-funding E&P capex and the addition of a premium multiple asset, we think the company trading near historically low levels vs. the group (2020 Enterprise Value to EBITDA) creates an attractive opportunity.
The $13 Jefferies price target compares with the $12.21 consensus figure. The shares traded at $10.95 Wednesday morning.
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This is a top play for investors looking to the Permian Basin, though it was started with a Hold rating at Jefferies. Cimarex Energy Co. (NYSE: XEC) is an independent exploration and production company. Its primary activities are in the Mid-Continent and Permian Basin areas of the United States.
The company is focused on increasing shareholder value through strategies linked to generating attractive economic returns on capital employed and profitable growth in per-share reserves, production and cash flow. It intends to profitably grow reserves and production through a balanced mix of exploration, exploitation and acquisitions.
The analyst said this when discussing Cimarex:
While completion intensity-driven improvements are encouraging, the company is currently on the leading edge and will likely experience less “rate of change” relative to peers. With minimal basis hedging or FT to mitigate these Delaware concerns, we think a historic multiple premium will no longer be awarded.
Cimarex investors are paid a small 0.64% dividend. Jefferies has a $100 price target. The posted consensus target is set much higher at $134.58, but the shares were trading at $99.70.