The Zacks Analyst Blog Highlights: Magellan Midstream Partners, BP, FedEx, Amazon.com and Google
Zacks Equity Research
For Immediate Release
Chicago, IL – May 1, 2013 – 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 includeMagellan Midstream Partners LP (MMP), BP plc (BP), FedEx Corp. (FDX), Amazon.com Inc. (AMZN) and Google Inc. (GOOG).
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Here are highlights from Tuesday’s Analyst Blog:
Magellan Likely to Beat Earnings Ests
We expect pipeline operator, Magellan Midstream Partners LP (MMP), to beat expectations when the company reports its first-quarter 2013 results before the opening bell on May 2, 2013.
Why a Likely Positive Surprise?
Our proven model shows that Magellan is likely to beat earnings because it has the right combination of two key factors.
Positive Zacks ESP:Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate estimate of 52 cents and the Zacks Consensus Estimate of 50 cents, stands at +4.00%. This is a meaningful and leading indicator of a likely positive earnings surprise for shares.
Zacks Rank #2 (Buy):The stocks with a Zacks Rank #1 (Strong buy), #2 (Buy) and #3 (Hold) have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and #5) should never be considered while going into an earnings announcement.
The combination of Magellan’s Zacks Rank #2 (Buy) and +4.00% ESP makes us very confident of a positive earnings beat on May 2, 2013.
What is Driving the Better-Than-Expected Earnings?
Magellan owns an attractive portfolio of energy infrastructure assets that generate stable and recurring fee and tariff-based revenues. This includes the longest refined petroleum products pipeline system and access to more than 40% of the refining capacity in the U.S. along with imports, and 85 petroleum terminals with more than 80 million barrels of storage capacity.
Moreover, Magellan’s investment grade credit ratings provide a competitive advantage in accessing capital at reasonable cost.
Finally, we remain upbeat regarding Magellan’s acquisition of petroleum storage and pipelines from a subsidiary of BP plc (BP). Following the acquisition, Magellan owns one of the largest crude oil storages in the Cushing crude oil region and will continue to exploit opportunities to improve utilization of these assets.
FedEx Extends Postal Service Bond
FedEx Express, an affiliate of FedEx Corp. (FDX), announced that it will continue with the air cargo delivery contract with the U.S. Postal Service. The agreement, which was supposed to expire on Sep 2013, has been renewed for the next seven years. The new contract comes into effect from Oct 2013.
Per the renewed deal, estimated at $10.5 billion, FedEx Express will continue to render transportation of Express Mail and Priority Mail within the U.S. airports. FedEx Express aims to provide the same high-quality services that it has been offering over the last 12 years to the Postal Department through the new agreement. Interestingly, the revised contract calls for enhanced operations, more capacity flexibility and improved activities.
Memphis, Tennessee based FedEx is the leader in global express delivery services and intends to spread its operations across the U.S., Canada and Mexico and capitalize on potential business opportunities in NAFTA (North American Free Trade agreement) markets. The company is boosting its international business by heavy investments to boost existing routes and make strategic acquisitions.
FedEx also launched a new business tool to aid e-commerce customers in their shipping process. The new system, fedex.com Integration Manager is a Web-based tool that connects with platforms like Amazon.com Inc. (AMZN) and Google Inc. (GOOG). The seamless connection allows enterprises running multiple online stores to simplify their selling and shipment process.
In the coming days, we expect FedEx to register strong earnings momentum and growth through long-term expansion opportunities. In Nov 2012, the company increased its shipping rates by 4.9% for FedEx Ground and FedEx Home Delivery shipments.
However, FedEx currently retains a Zacks Rank #4 (Sell), reflecting a number of risk factors. We expect the company’s expansion in Europe to remain affected by economic volatilities resulting in weak business from the continent coupled with low Asian demand. Further, increased investment, competitive threats and unionized workforce could limit the upside potential of the stock.
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