Zacks Bull and Bear of the Day Highlights: Hanesbrands, KLA-Tencor, Natural Resource Partners, CONSOL Energy and Noble Energy
Zacks Equity Research
For Immediate Release
Chicago, IL – December 24, 2012 – Zacks Equity Research highlights Hanesbrands (HBI) as the Bull of the Day and KLA-Tencor (KLAC) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Natural Resource Partners L.P. (NRP), CONSOL Energy Inc. (CNX) and Noble Energy Inc. (NBL).
Hanesbrands (HBI) posted solid third quarter 2012 results with earnings of $1.11 per share, which outpaced the prior-year earnings by 31% and the Zacks Consensus Estimate by 5.7%. The upswing was driven by strong sales growth in both Innerwear and Outerwear segments.
Overall, we are impressed with the company's strong portfolio of brands and its continuous innovations. Efficiency in initiatives has led to substantial cost savings, and the company is also taking efforts to optimize its inventories, reduce long-term debt and de-leverage its balance sheet. Ads by Google
Despite currency and cotton cost headwinds, Hanesbrands anticipates its earnings to improve in fiscal 2012 and 2013. Based on our 2012 earnings estimate of $2.58, the stock is trading at 13.8x, which is a 15.9% discount to the industry average of 16.4x. Our target price of $43.00 is based on approximately 16.7x our 2012 earnings estimate.
KLA-Tencor (KLAC) is one of the leading suppliers of inspection and metrology products and services. The company's fiscal first quarter results missed the Zacks Consensus with forward guidance also disappointing. This was mainly because KLA is greatly exposed to the foundry segment, which has now been hit by uncertain demand for mobile devices.
However, KLA's comprehensive product line, cost reduction initiatives and strong balance sheet remain positives that will generate growth whenever cyclical pressures permit. Of course, rising competition and concentrated customer base increase execution risk.
We are downgrading KLAC shares to Underperform, since material increase in revenues is unlikely in the current environment. Our target price of $44.00 (14.1X P/E) remains a discount to the peer group.
Coal and mineral partnership, Natural Resource Partners L.P. (NRP) announced its purchase of an overriding royalty interest in the liquids-rich portion of the Marcellus Shale formation situated in the Appalachian basin. The shale prospect covers approximately 88,000 net acres and was bought at a price of $30.3 million.
The area is presently being leased and has significant production as well as development potential. The stake buyout was financed through the partnership’s credit facility.
The acquisition will upgrade Natural Resource Partners' premium asset portfolio. Presently, the partnership has properties in the resource-rich prospects of Marcellus Shale, Mississippi Lime and Haynesville Shale.
The partnership derives income mainly from the royalties on the various reserves owned and often engages in purchase of high-quality assets to boost potential growth. Natural Resources Partners recently acquired frac sand reserves in Wisconsin for an amount of $15.0 million. Given the popularity of fracturing technology in the well drilling process, the partnership is expected to capitalize from higher oil and natural gas production volumes in the future.
With the current downturn in the coal market, we believe this back-to-back unconventional asset buyout will sit well with the partnership’s broad growth goals. Moreover, a diversified asset basket will lend constancy to the partnership’s earnings stream in the near term.
However, demand volatilities arising from uncertain weather conditions and increase in coal stockpiles in the Central Appalachia will temper the aforementioned positives. Natural Resource Partners currently has a short-term Zacks #3 Rank (Hold rating).
Another coal major, CONSOL Energy Inc. (CNX) has partnered with exploration and production company Noble Energy Inc. (NBL) for the development of natural gas prospects in the Marcellus play. The duo has raised the estimate for gas recoverable reserves in the area by 41%.
For Natural Resources Partners, the Zacks Consensus Estimates for the fourth quarter and full year 2012 are currently pegged at 43 cents per unit and $1.84 per unit, respectively.
With a market capitalization of $1.87 billion, the Houston, Texas based partnership engages in the ownership and management of coal properties in Appalachia, the Illinois Basin, and the western United States, as well as lignite reserves in the Gulf Coast region.
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.
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