For Immediate Release
Chicago, IL – March 1, 2012 – Zacks Equity Research highlights:
ProAssurance Corp. (PRA) as the Bull of the
Day and Ultra Petroleum Corp. (UPL) as the
Bear of the Day. In addition, Zacks Equity Research provides
analysis on Talisman Energy Inc.
(TLM), Encana
Corp. (ECA) and
Chesapeake Energy Corp.
(CHK).
Full analysis of all these stocks is available at
http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Bull of the Day:
ProAssurance Corp.'s (PRA) fourth quarter
earnings surpassed the Zacks Consensus Estimate on the back of an
improved top line. Additionally, operating cash flow and asset
position also improved, driving the book value of shares. Higher
operating cash flow is also likely to translate into enhanced
operating leverage and excess capital generation for share
repurchases.
Though the intense price and product competition, weak rate
environment, loss cost trends and regulatory challenges limit the
desired upside in the sector, we believe the benefits of geographic
diversity, aggressive claims defense, stable ratings, improving ROE
and strong financial position are likely to have a positive impact
on the company over time.
Our six-month target price of $107.00 per share equates to about
18.3x our earnings estimate for 2012. Combined with the $1.00 per
share annual dividend, this target price implies an expected return
of 20.0% over that period, which is consistent with our Outperform
recommendation.
Bear of the Day:
Concerned by the current weak sentiment for natural gas, we are
downgrading Ultra Petroleum Corp. (UPL)
shares to Underperform from Neutral. The glut in domestic gas
supplies continues to weigh on the fundamentals, and storage levels
remain well above their benchmark levels. This translates into a
bearish near-to-medium term outlook for natural gas-weighted
companies like Ultra.
Taking a cautious view of prices, the company's capital program
this year is cutting on dry natural gas development. Even then, we
expect Ultra to perform below its peers and industry levels in the
coming months. We believe there are other companies in the natural
gas E&P group that seem to offer better exposure to the
sector.
We expect the company to continue to struggle unless the outlook
for natural gas prices improves. This is corroborated by our new
Underperform recommendation. Our $22 price objective reflects a
multiple of 4.5X trailing twelve-month cash flow.
Latest Posts on the Zacks Analyst Blog:
Nat Gas Rig Count Falling
The natural gas rig count has been falling since the last few
weeks, 224 rigs in fact (or 24%) from the recent highs of 934 in
October 28. Is this bullish for natural gas fundamentals? The
answer is "no," if we look at the U.S. production and the shift in
rig composition.
With horizontal rig count – the technology responsible for the
abundant gas drilling in domestic shale basins – currently close to
its all-time high, output from these fields remains robust. As a
result, gas inventories still remain at elevated levels – up 40%
from benchmark levels.
In fact, natural gas prices have dropped some 47% from 2011 peak
of about $5.00 per million Btu (MMBtu) in June to the current level
of around $2.65 (referring to spot prices at the Henry Hub, the
benchmark supply point in Louisiana). Incidentally, prices hit a
10-year low of $2.23 in late January.
To make matters worse, mild winter weather across most of the
country has curbed natural gas demand for heating, indicating a
grossly oversupplied market that continues to pressure commodity
prices in the backdrop of sustained strong production.
This has forced several natural gas players to announce
drilling/volume curtailments. Exploration and production outfits
like Talisman Energy Inc.
(TLM) and Encana
Corp. (ECA) have
all reduced their 2012 capital budget to minimize investments in
development drilling.
On the other hand, Oklahoma-based Chesapeake Energy
Corp. (CHK) – the
second-largest U.S. producer of natural gas – has opted for
production shut-ins to cope with the weak environment for natural
gas that is likely to prevail during the year.
However, we feel these planned reductions will not be enough to
balance out the massive natural gas supply/demand disparity and
therefore we do not expect much upside in gas prices in the near
term. In other words, there appears no reason to believe that the
supply overhang will subside and natural gas will be out of the
dumpster in 2012.
Get the full analysis of all these stocks by going to
http://at.zacks.com/?id=2649.
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two
stocks that are likely to outperform (Bull) or underperform (Bear)
the markets over the next 3-6 months.
About the Analyst Blog
Updated throughout every trading day, the Analyst Blog provides
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events impacting stocks and the financial markets.
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Continuous analyst coverage is provided for a universe of 1,150
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CHESAPEAKE ENGY (CHK): Free Stock Analysis Report
ENCANA CORP (ECA): Free Stock Analysis Report
PROASSURANCE CP (PRA): Free Stock Analysis Report
TALISMAN ENERGY (TLM): Free Stock Analysis Report
ULTRA PETRO CP (UPL): Free Stock Analysis Report
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