Questar Beats Top and Bottom Line - Analyst Blog

Natural gas-focused energy company, Questar Corp. (STR - Analyst Report) reported impressive fourth quarter and full-year 2010 results, thanks to superb execution by its business units and lower operating and maintenance expense.

Earnings per share in the fourth quarter came in at 36 cents, surpassing both the Zacks Consensus Estimate and the prior-year quarter result of 31 cents. Full-year 2010 earnings, excluding separation costs, were $1.13 per share, up 10.8% year over year and 4.6% above our projection.

Total revenue for the quarter came in at $362.7 million, up 5.4% from the year-ago level of $344.0 million and ahead of the Zacks Consensus Estimate of $301 million. The result reflects higher production volumes across all business segments. 

Questar generated total revenue of $1,123.6 million in 2010, up 1.2% year over year from $1,109.9 million. The company comfortably surpassed the Zacks estimate of $1,098.0 million.

Questar Spin-Off

On June 30, 2010, Questar successfully split its unregulated exploration and production business from its regulated utility business, thereby creating two independent, publicly traded companies. The newly formed company was named QEP Resources (QEP - Snapshot Report).

Segment Analysis

Questar Gas: The segment generated $302.7 million in revenue, up a modest 3.5% year over year. Net income from the segment was of $22.1 million, 11% higher than fourth quarter 2009. The segment benefited from an increase in the number of customers along with higher tariff rates.

At the year-end 2010, Questar Gas served 909,600 customers, up 11,000 or 1.2% year over year.

Wexpro: Wexpro’s consolidated sales were up 17.6% year over year at $8.0 million in the fourth quarter. Segmental income from continuing operations increased to $22.7 million from $21.5 million in the prior-year quarter.

Wexpro reported a 5.8% rise in quarterly production of natural gas (12.7 billion cubic feet /Bcf from 12.0 Bcf in fourth quarter 2009).

Questar Pipeline: Questar Pipeline’s consolidated revenues of $52.0 million were up 16.1% from the year-ago quarter while income from continuing operations came in at $18.0 million, reflecting an increase of 25%. The improvement was attributable to higher transportation commitments (coming from Overthrust Pipeline compression-expansion project) and strong natural gas liquids (NGL) sales.

Balance Sheet

As of December 31, 2010, Questar had cash and cash equivalents of $21.8 million and long-term debt (including current portion) of $1,080.5 million, with a debt-to-capitalization ratio of 51%.

Dividend Hike

Board of directors of Questar announced a quarterly dividend of 15.25 cents (an annualized payout of 61 cents), up 9% from 14 cents (or 56 cents annually) in the first quarter of 2011.           

2011 Guidance

Management reaffirmed its 2011 earnings guidance at $1.07 to $1.11 per average diluted share, expecting reduced NGL sales in the Questar Pipeline segment as well as increased deferred taxes at Wexpro in 2011.

Our Recommendation

We believe that Utah-based Questar will be able to generate steady earnings and dividend growth in the coming years through strong operational performance across all its business units. The company’s sole emphasis on natural gas markets, focus on long-term contracts and an efficient managerial team are expected to drive production and reserves higher.

However, we remain highly apprehensive about weak natural gas prices, domestic imbalance of supply/demand and political headwinds in certain regions. We also believe that Questar remains exposed to greater competitive risks, coming from peers such as Cabot Oil & Gas Corporation (COG - Analyst Report) and Anadarko Petroleum Corporation (APC - Analyst Report), until it has fully reaped the benefits of the spin-off.

We maintain our long-term “Neutral” recommendation on the stock. Questar currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.

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Lowe's Tops Estimates - Analyst Blog

Lowe’s Companies, Inc. (LOW - Analyst Report) recently posted better-than-expected fourth-quarter 2010 results. The quarterly earnings of 21 cents a share beat the Zacks Consensus Estimate of 18 cents and soared 50% from 14 cents earned in the prior-year quarter. The quarterly earnings also exceeded the company’s guidance range of 16 cents to 19 cents a share.

The Zacks Consensus Estimate rose by a penny prior to the earnings release with 5 out of 26 analysts covering the stock revising their estimates upwards and none lowering their projections in the last 30 days.

Lowe’s said that it now expects first-quarter 2011 earnings in the range of 34 cents to 38 cents a share, and fiscal 2011 earnings between $1.60 and $1.72. The current Zacks Consensus Estimates of 38 cents and $1.66 per share for the first quarter and fiscal 2011, respectively, dovetail with the company’s projections.

We witness that growth in the top-line has accelerated. After registering a growth of 1.9% in third-quarter 2010, net sales for the fourth quarter rose 3.1% to $10,480 million, which also came ahead of the Zacks Consensus Estimate of $10,466 million. Lowe’s indicated that it expects to gain market share during fiscal 2011.

Although the economy is showing signs of a revival, we believe that spending on big remodeling projects will likely remain under pressure until the housing market stabilizes, inventory levels normalize and consumer-spending rebounds.

Management now expects sales to increase approximately 2% and 5% in the first quarter and fiscal 2011, respectively.

The rate of growth in comparable-store sales also increased during the quarter under review. After increasing 0.2% in the third quarter of 2010, comparable-store sales grew by 1.1% in the fourth quarter. Lowe’s expects comparable-store sales to remain flat in the first quarter and to increase between 1% and 2% in fiscal 2011.

Lowe’s, which competes with The Home Depot, Inc. (HD - Analyst Report), indicated that gross profit climbed 4.8% to $3,726 million, whereas gross margin expanded 60 basis points to 35.6% during the quarter. The growth in gross profit was aided by a jump in the top line that shaved off an increase of 2.1% in cost of sales.

During the quarter, Lowe’s opened 17 stores and shut 2 stores. The company expects to open 25 to 30 new stores during fiscal 2011. The company currently operates 1,749 stores.

The world’s second largest home improvement retailer, Lowe’s, ended fiscal 2010 with cash and cash equivalents of $652 million, total long-term debt of $6,573 million and shareholders’ equity of $18,112 million.

Currently, we have a long-term Neutral rating on the stock. However, Lowe’s holds the Zacks #2 Rank, which translates into a short-term Buy rating.

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Chelsea FC owner Roman Abramovich set for court showdown with Boris Berezovksy over Sibneft

The stage was set for the eagerly anticipated public showdown between two of the world's richest men after the Court of Appeal refused to strike out Mr Berezovsky's £2bn lawsuit.

Mr Berezovsky alleges that Mr Abramovich used "threats and intimidation" to force him to sell his stake in Sibneft, a Russian oil company, and Rusal, an aluminium producer, at a fraction of their claimed value.

He claims that he sold his shares in Sibneft only because he feared that if he refused Mr Abramovich would ask Mr Putin, then Russian President, to expropriate them.

In the lawsuit, Mr Berezovsky claims Mr Abramovich agreed that he and Arkadi "Badri" Patarkatsishvili, Georgia's richest man, would own half of Sibneft, with Mr Abramovich holding the shares in trust.

Mr Abramovich denies that either Mr Berezovsky, who fled Russia in 2000 after falling out with Mr Putin and now lives in exile in Britain, or Mr Patarkatsishvili ever had any interest in the business.

Mr Abramovich claims that any payment made to Mr Berezovsky was not in return for his claimed 21.5pc stake in Sibneft but a recognition of his "political assistance and protection" during the creation of the oil company. Mr Abramovich sold Sibneft to Gazprom, the state-owned energy group, for £8.5bn in 2005.

Mr Berezovsky, who has been the subject of assassination attempts in London, was previously Mr Abramovich's mentor.

A panel of three appeal judges on Wednesday upheld a previous ruling that the case, which is scheduled to start at London's High Court later this year, must go ahead. Special security measures are likely to include sweeping the court for bombs and ensuring that it is sniper-proof.

Mr Berezovsky first boasted of his plans to sue Mr Abramovich in 2005, but it was more than two years before the claim was served.

Flanked by a group of bodyguards, Mr Berezovsky eventually personally served the writ in a Hermes luxury luggage store in Sloane Square.

"I am delighted with the Court of Appeal's decision and am looking forward to proving my case at trial," Mr Berezovsky said.

Moscow has demanded his extradition but the British government has refused and granted him political asylum in 2003.

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Kansas City Federal Reserve Bank President Thomas Hoenig calls for Wall Street banks should be broken up

“I am convinced that the existence of too-big-to-fail financial institutions poses the greatest risk to the US economy,” Kansas City Federal Reserve Bank President Thomas Hoenig said.

“They must be broken up. We must make sure that large financial organizations are not in position to hold the US economy hostage. We must not allow organisations operating under the safety net to pursue high-risk activities and we cannot let large organisations put our financial system at risk.”

Mr Hoenig also argues that the most sweeping overhaul of US financial regulation since the Great Depression won’t prevent the largest banks from taking excessive risks and increasing market share.

“In my view, it is even worse than before the crisis,” he said. “As well-intentioned as the Dodd-Frank Act may be, it will not improve outcome.

The Dodd-Frank Act created a resolution authority to unwind the largest financial institutions. It also adopted the Volcker rule, which aims at reducing the odds that banks will make risky investments and put their federally-insured deposits at risk.

The Fed chief called for "Glass Steagall-type" provisions - referring to post-Depression prohibitions that forbade deposit-taking commercial banks from engaging in the riskier activities normally confined to the investment sector.

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Kansas City Federal Reserve Bank President Thomas Hoenig calls for Wall Street banks to be broken up

“I am convinced that the existence of too-big-to-fail financial institutions poses the greatest risk to the US economy,” Kansas City Federal Reserve Bank President Thomas Hoenig said.

“They must be broken up. We must make sure that large financial organizations are not in position to hold the US economy hostage. We must not allow organisations operating under the safety net to pursue high-risk activities and we cannot let large organisations put our financial system at risk.”

Mr Hoenig also argues that the most sweeping overhaul of US financial regulation since the Great Depression won’t prevent the largest banks from taking excessive risks and increasing market share.

“In my view, it is even worse than before the crisis,” he said. “As well-intentioned as the Dodd-Frank Act may be, it will not improve outcome.

The Dodd-Frank Act created a resolution authority to unwind the largest financial institutions. It also adopted the Volcker rule, which aims at reducing the odds that banks will make risky investments and put their federally-insured deposits at risk.

The Fed chief called for "Glass Steagall-type" provisions - referring to post-Depression prohibitions that forbade deposit-taking commercial banks from engaging in the riskier activities normally confined to the investment sector.

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Forex – GBP/JPY Down During The Asian Session

Forex Pros – The British Pound was lower against the Japanese Yen on Thursday.

GBP/JPY was trading at 133.62, down 0.12% at time of writing.

The pair was likely to find support at 133.27, Tuesday’s low, and resistance at 135.46, Monday’s high.

Meanwhile, the British Pound was up against the U.S. Dollar and down against the Euro, with GBP/USD gaining 0.15% to hit 1.6236 and EUR/GBP rising 0.06% to hit 0.8485.

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The Republican Shakedown

You can’t fight something with nothing. But as long as Democrats refuse to talk about the almost unprecedented buildup of income, wealth, and power at the top – and the refusal of the super-rich to pay their fair share of the nation’s bills – Republicans will convince people it’s all about government and unions.

Republicans claim to have a mandate from voters for the showdowns and shutdowns they’re launching. Governors say they’re not against unions but voters have told them to cut costs, and unions are in the way. House Republicans say they’re not seeking a government shutdown but standing on principle. “Republicans’ goal is to cut spending and reduce the size of government,” says House leader John Boehner, “not to shut it down.” But if a shutdown is necessary to achieve the goal, so be it.

The Republican message is bloated government is responsible for the lousy economy that most people continue to experience. Cut the bloat and jobs and wages will return.  

Nothing could be further from the truth, but for some reason Obama and the Democrats aren’t responding with the truth. Their response is: We agree but you’re going too far. Government employees should give up some more wages and benefits but don’t take away their bargaining rights. Private-sector unionized workers should make more concessions but don’t bust the unions. Non-defense discretionary spending should be cut but don’t cut so much.

In the face of showdowns and shutdowns, the “you’re right but you’re going too far” response doesn’t hack it. If Republicans are correct on principle, they’re more likely to be seen as taking a strong principled stand than as going “too far.” If they’re basically correct that the problem is too much government spending why not go as far as possible to cut the bloat?

The truth that Obama and Democrats must tell is government spending has absolutely nothing to do with high unemployment, declining wages, falling home prices, and all the other horribles that continue to haunt most Americans.

Indeed, too little spending will prolong the horribles for years more because there’s not enough demand in the economy without government spending. 

The truth is that while the proximate cause of America’s economic plunge was Wall Street’s excesses leading up to the crash of 2008, its underlying cause — and the reason the economy continues to be lousy for most Americans — is so much income and wealth have been going to the very top that the vast majority no longer has the purchasing power to lift the economy out of its doldrums. American’s aren’t buying cars (they bought 17 million new cars in 2005, just 12 million last year). They’re not buying homes (7.5 million in 2005, 4.6 million last year). They’re not going to the malls (high-end retailers are booming but Wal-Mart’s sales are down).

Only the richest 5 percent of Americans are back in the stores because their stock portfolios have soared. The Dow Jones Industrial Average has doubled from its crisis low. Wall Street pay is up to record levels. Total compensation and benefits at the 25 major Wall St firms had been $130 billion in 2007, before the crash; now it’s close to $140 billion.

But a strong recovery can’t be built on the purchases of the richest 5 percent.

The truth is if the super-rich paid their fair share of taxes, government wouldn’t be broke. If Governor Scott Walker hadn’t handed out tax breaks to corporations and the well-off, Wisconsin wouldn’t be in a budget crisis. If Washington hadn’t extended the Bush tax cuts for the rich, eviscerated the estate tax, and created loopholes for private-equity and hedge-fund managers, the federal budget wouldn’t look nearly as bad.

And if America had higher marginal tax rates and more tax brackets at the top, – for those raking in $1 million, $5 million, $15 million a year – the budget would look even better. We wouldn’t be firing teachers or slashing Medicaid or hurting the most vulnerable members of our society. We wouldn’t be in a tizzy over Social Security. We’d slow the rise in healthcare costs but we wouldn’t cut Medicare. We’d cut defense spending and lop off subsidies to giant agribusinesses but we wouldn’t view the government as our national nemesis.

The final truth is as income and wealth have risen to the top, so has political power. The reason all of this is proving so difficult to achieve is the super-rich, such as the Koch brothers, have been using their billions to corrupt politics and enlarge and entrench their outsized fortunes.  They’re bankrolling Republicans who are mounting showdowns and threatening shutdowns, and who want the public to believe government spending is the problem. 

They are behind the Republican shakedown. 

These are the truths that Democrats must start telling, and soon. Otherwise the Republican shakedown may well succeed. 

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