Zacks: Haliburton a Near Term Buy?

Earlier this week, major oilfield services provider Halliburton Co. (HAL) announced its financial results for the quarter ended September 30, 2010. Now that the analysts have had some time to digest the quarterly performance, they are weighing in with their estimate revisions. Below we cover the results of the recent earnings announcement, subsequent analyst estimate revisions and Zacks ratings for the stock.

Earnings Review
Halliburton's better than anticipated third quarter 2010 results were helped by the strength in the all important North American onshore activity levels (to which the company is heavily exposed through its market share leading pressure pumping business). Earnings per share, excluding special items, came in at 58 cents, beating the Zacks Consensus Estimate of 56 cents and were comfortably ahead of the year ago adjusted profit of 31 cents.

Revenues of $4.7 billion, 30% above the third quarter of 2009, also surpassed the Zacks Consensus Estimate of $4.6 billion, as sales increased across the company’s business units. During the quarter, North America accounted for approximately 51% of Halliburton’s total revenues and 65% of its operating income.

Agreement of Estimate Revisions
There is a strong positive agreement among the analysts regarding Halliburton’s outlook. In particular, we see a notable number of estimate revisions over the past 7 days, indicating that the revisions were in response to the company’s third quarter earnings release. Out of 33 analysts covering the stock, 23 have revised their estimates for 2010 upward, while 5 have gone in the opposite direction. Looking forward to 2011, the trend is more or less similar. Out of 33 analysts, 22 hiked their estimates compared to just one negative revision. Estimates are up for the December quarter of 2010 as well. For the current quarter, 21 of the 29 analysts have increased their estimates over the last 7 days, against 5 downward revisions.

Magnitude of Estimate Revisions
As a result of the analysts revising estimates over the past 7 days, the Zacks Consensus Estimates for fiscal 2010 and 2011 have gone up 5 cents (from $1.94 to $1.99) and 13 cents (from $2.49 to $2.62), respectively. Meanwhile, the estimate for the December 2010 quarter is up by 3 cents. The increases are based on the expectations of bullish near-term U.S. land drilling trends, where activity is being driven by oil and liquids-rich plays. This will make the reduction in gas activity less meaningful. Halliburton will continue to be a beneficiary of the bullish rig count fundamentals in the U.S., driven by horizontal drilling in the service intensive plays.

Our Recommendation
Halliburton currently has a Zacks #2 Rank (short-term 'Buy' rating). In the near term, the company is likely to benefit from bullish U.S. land drilling trends, where activity is tracking above expectations. However, new environmental regulations for hydraulic fracturing in the shale plays, the intensely competitive nature of the market, and depressed natural gas prices will continue to overhang the stock during the longer-term, accounting for our Neutral recommendation.

Courtesy of  Zack.com


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Crude Oil Bears Appear to Have a Clear Near Term Advantage, Here's Fridays Numbers

Crude oil was higher due to short covering overnight but remains below the 20 day moving average crossing at 81.78. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term.

If December extends this week's decline, trendline support drawn off the August-September lows crossing near 78.10 is the next downside target. Closes above the reaction high crossing at 84.80 are needed to confirm that a short term low has been posted.

First resistance is the 20 day moving average crossing at 81.78
Second resistance is the 10 day moving average crossing at 82.25

Crude oil pivot point for Friday morning is 81.12

First support is Wednesday's low crossing at 79.90
Second support is the uptrend line drawn off the August-September lows crossing near 78.10


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Bloomberg: Crude Oil Rises as Reports Show Improved U.S. Economic Outlook

Crude oil climbed in New York after reports showed improvement in the U.S. economy, raising investor expectation fuel demand will increase. Futures retraced some of yesterday’s 2.4 percent decline as Asian equity markets gained following data showing jobless claims fell in the world’s largest economy. The New York based Conference Board’s index of leading economic indicators climbed 0.3 percent, matching the forecast of economists surveyed by Bloomberg News.

“For the short term, the positive economic indicators should support the prices,” said Tetsu Emori, a commodity fund manager at Astmax Ltd. in Tokyo. “Fundamentals aren’t what people are looking at for the market but currencies and financial market conditions.” The December contract added as much as 60 cents, or 0.7 percent, to $81.16 a barrel in electronic trading on the New York Mercantile Exchange, and was at $81.05 at 11:55 a.m. Singapore time. Yesterday it lost $1.98 to $80.56. The contract has fallen 1 percent this week.

Oil also rose as Labor Department figures yesterday showed U.S. initial jobless claims dropped by 23,000 to 452,000 in the week ended Oct. 15. Chinese crude production gained 9 percent in September, the National Bureau of Statistics said Oct. 21. Oil refining reached 8.5 million barrels a day last month, China Mainland Marketing Research Co. said......Read the entire article.



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Commodity Corner: Crude Falls as Dollar Rebounds

Crude futures fell Thursday as economic worries resurfaced and the dollar rebounded against the euro. Oil prices for December delivery settled at $80.56 a barrel, down 2.4 percent from the previous day. Prices continued to feel the ripple from China's decision Tuesday to increase interest rates. As the Chinese government reported, projected third quarter gross domestic product growth fell to 9.6 percent from a 10.3 percent growth rate in the second quarter.

The second largest oil consumer after the U.S., China, is estimated to account for approximately 40 percent of an expected 2.1 million barrel per day increase in global oil demand this year and approximately one third of a 1.2 million-b/d increase next year, according to the International Energy Agency. The dollar rose 0.3 percent against the euro Thursday after falling earlier as much as 0.6 percent. Light, sweet crude futures traded between $80.09 and $82.70.

Likewise, natural gas futures plummeted to new 13-month lows Thursday. Henry Hub natural gas decreased 4.8 percent and settled at $3.37 per thousand cubic feet. The U.S. Energy Information Administration (EIA) reported that natural gas inventories grew by 93 billion cubic feet last week, marking the sixth consecutive above average weekly build. According to the inventory report, the U.S. had 3.68 trillion cubic feet of natural gas in underground storage last week.

The National Hurricane Center observed a tropical storm headed toward Mexico's Yucatan Peninsula Thursday. The system, Tropical Storm Richard, formed in the northwestern Caribbean Sea. Meteorologists predict that the storm may continue into the Gulf of Mexico, but major impact should be prevented by the high wind shear. The intraday range for natural gas was $3.35 to $3.54 Thursday. November delivery gasoline prices settled at the lowest point since Sept. 29 at $2.04 a gallon, after peaking at $2.08 and bottoming out at $2.03.

Courtesy of Rigzone.Com


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The Dollar-Crude Oil Trade

Dan Dicker, an independent oil trader, shares his dollar-oil trade with CNBC.



Why Diversification Doesn't Work

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Markets Close Mixed as Commodity Bulls Fight The Stronger Dollar

The U.S. stock indexes closed mixed today. The stock index bulls still have the overall near term technical advantage as price uptrends are still in place on the daily bar charts. Stock index bulls have been very pleased with price action so far this autumn, a time which is normally not favorable to market bulls. My bias is that prices will trade mostly sideways, but with a slight upside bias, into the end of the year.

Crude oil closed down $1.91 at $80.63 a barrel today. Prices closed nearer the session low today. A rebounding U.S. dollar pressed the crude market lower today. Trading has turned very choppy. Bulls and bears are on a level near term technical playing field.

Natural gas closed down 13.3 cents at $3.76 today. Prices closed nearer the session low today and prices hit another fresh contract low. The bears have the solid overall near term technical advantage.

Gold futures closed down $19.70 at $1,324.50 today. Prices closed near the session low today and hit a fresh two week low. Profit taking, a firming U.S. dollar index and lower crude oil prices combined to pressure gold today. Prices also scored a bearish "outside day" down on the daily bar chart, whereby the high was higher and low was lower than the previous session's trading range, with a lower close. Some near term technical damage was inflicted today as a 2 1/2 month old uptrend on the daily bar chart was at least temporarily negated today to begin to suggest that a near term market top is in place. Bulls do still have the overall near term and longer term technical advantage, but have faded this week and need to show fresh power soon.

The U.S. dollar index closed up 27 points at 77.69 today. Prices closed near the session high today and saw short covering in a bear market. Dollar index bears still have the overall near term technical advantage.


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Diamond Offshore: Market Sentiment Is Shifting, Rare Opportunity Is Ending

From Seeking Alpha contributor Hester.....

Earlier in the year, at the end of May, I wrote a bullish article on Diamond Offshore (DO). At the time, shares of Diamond were getting crushed, as the hysteria over the BP spill was in full swing, with many speculating that BP would go bankrupt. The offshore drilling industry was just starting to go under a microscope by regulators. The drilling moratorium was just a twinkle in Ken Salazar's eye. People refused to go near drilling stocks because of regulatory uncertainty, possible increased insurance costs, the risk of another spill, and most importantly, the general dislike of the sector.

It has been nearly five months since all of this, and most of the reasons to sell are nearly gone. The moratorium and regulatory scrutiny is basically over. Insurance costs will be passed on to customers. The BP spill has ended, it is out of the news, and cleanup is moving swiftly. The risk of another spill is the exact same as before the BP spill (which is low), but perception of the risk is lowered. The general dislike and hatred of anything in the sector is slowly ending. The opportunity to purchase great companies at ridiculous prices is may be ending.

Yet, DO is trading at basically the same price as when my article came out and when I started buying. The stock price took a big plunge, from high $60's per share to mid $50's, after the article when people were speculating that Diamond had a spill themselves. However, anybody who took the time to listen to management or actually read past the headlines knew it was a non issue, and the stock eventually recovered to where it is now. So even though these issues are ending, today's buyers are offered a rare opportunity to buy one of the highest quality oil drillers in the world, at just 10 times earnings......Read the entire article.


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Dan Dicker: A Refinery Buy - Frontier Oil

Dan Dicker has managed to find one refinery worthy of a trade.



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Pinpointing the Top China ETF Opportunities

We have been watching China and their ETF's pretty closely and this article is a good read as to why these are the top three ETF's.....

Think one ETF is as good as another as long as it’s in the same sector, country, or style as the alternatives? Perhaps that was the case ten years ago. In an effort to differentiate their exchange trade funds from others, however, ETF sponsors have really started to hyper focus their funds’ portfolios…. even within a particular grouping.

Take China based exchange traded funds for example. While the iShares FTSE/Xinhua Chain 25 Index Fund (FXI) may have the lead in hearts and minds of China-hungry investors, other funds of the same ilk may actually be the better choice, depending on your goal or strategy.

Just to put this idea into a stunning perspective, check out this performance chart of all the major China oriented funds for the year to date. While one could reasonably expect a mild amount of disparity when it comes to returns, you’d think they’d all basically offer the same result After all, they’re each investing in the same broad cross section of China’s stocks. Take a look though.

A 17% gain for the leader, and a 5% gain for the laggard, but the same underlying stocks? Wow. Even taking out the ‘Honk Kong’ leader, you’ve still got a 100% disparity from the next best performer and the weakest one. Of course, the different performances come as no real surprise once you look under the hood of these funds and really see what each is holding.

Just like many U.S. based ETFs, the idea of a “cross section of the country’s stocks” can have various meanings. For instance, the iShares FTSE/Xinhua China 25 Index’s (FXI) biggest two holdings are China Mobile Ltd., and then China Construction Bank Corporation. That sharply contrasts with the two biggest holdings of the iShares MSCI Hong Kong Fund (EWH), which are (in order) Sun Hung Kai Properties, Ltd., and Cheung Kong Holdings, Ltd.

To be clear, this isn’t a complaint. Quite the contrary actually, we should be celebrating these differences, so we can get the most out of a regional based opportunity rather than sit contently holding watered down carbon copies of ETFs. With that in mind, that’s where the real China opportunity comes to light.

They may still qualify as ‘new’, but several sector based China exchange traded funds are plenty liquid enough to trade now, and the performance separation within the group is easily wide enough to prompt a trader to pick and choose certain vehicles.

Take a look at the year to date performance chart of these sector-based ETFs, and take special notice a 20% gap between the leader and the laggard for the year so far.

Our favorites are the three leaders…. the Global X China Consumer ETF (CHIQ), the Claymore/AlphaShares China Small Cap ETF (HAO), and the Claymore/AlphaShares China Real Estate ETF (TAO). We either currently own those names in the ETF portfolio, or intend to own soon. Any of them offer a little more ‘umph’ than FXI does at this point.

The point here is simply to highlight the fact that there are obscure trends within the bigger China trend that are well worth tapping into. That’s one of the focal points of our ETF service, and the approach has been very rewarding.

Check out more of Andrew Hart post at  ETF TRADR.com



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Phil Flynn: French Fried

Alright, I admit it was kind of fun snickering about the French Strikes. You know like joking about the French work ethic (assuming they had one). You know the routine. The French have been striking and staging mass protests that have turned violent as the government moves to take away French entitlements they cannot pay for. The French are to vote on raising the retirement age from 60 to 62 (Sidérer!!!). With an aging French population and years of the government giving the country free goodies, the government is going to have to make much needed reforms or face an inevitable economic collapse.

The strikes have shut down 12 oil refineries in France leading to shortages of diesel and gasoline. The International Oil Daily Reported that, “lost French production is driving dramatic price gains in diesel and jet fuel in Europe, France’s 12 oil refineries, all but one of which has been shut down by national strikes, produce around 60,000 tons of diesel and 30,000 tons of jet a day. But even with refineries at full production, the country is a net importer of both products. Minimal domestic production means France is sucking in products from neighboring Germany, Italy and even Spain, as well as drawing from strategic......Read the entire article.


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