CHICAGO, April 25, 2011 /PRNewswire/ -- 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 include: BP plc (NYSE: BP),
Transocean Ltd. (NYSE: RIG), Cameron International
Corp. (NYSE: CAM), Chipotle Mexican Grill, Inc. (NYSE:
CMG) and California Pizza Kitchen Inc. (Nasdaq: CPKI).
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Here are highlights from Thursday's Analyst Blog:
BP: Continuing the Blame Game?
On the first anniversary of the Deepwater Horizon rig disaster,
British giant BP plc (NYSE: BP) has filed suits in the
New Orleans federal court against
two of its contractors – Transocean Ltd. (NYSE: RIG) and
Cameron International Corp. (NYSE: CAM) – seeking billions
of dollars in damages and other costs. The London-based group has accused Transocean and
Cameron of negligence that led to the biggest environmental
disaster in U.S. history.
As a reminder, on April 20, 2010,
offshore driller Transocean's ultra-deepwater Horizon drilling
platform, contracted to BP, sank following an explosion while
operating in the U.S. Gulf of
Mexico off the coast of Louisiana. The incident killed 11 workers and
spewed more than 200 million gallons of crude in what is touted as
the worst oil spill in U.S. history. Subsequently, a moratorium was
imposed on offshore drilling in the region at water depths of more
than 500 feet, which was lifted on October
12, 2010.
The lawsuit filed by BP alleges that Transocean, which owned and
operated the Deepwater Horizon, was squarely to blame for the oil
spill, as every bit of safety system/device and well control
procedure on the rig failed. The Swiss company overlooked critical
signs associated with the disaster and failed to take appropriate
actions to shut in the Macondo well, alleges BP, and has therefore
asked for $40 billion in damages.
Separately, BP accused Cameron – the maker of a critical safety
device called 'blowout preventer' – of designing and building a
faulty piece of equipment and negligently maintaining it, which
then failed to properly operate when required. As a result, BP
seeks to force Cameron to cough up all or part of the damages that
could be charged against Europe's
second-largest oil company by the federal government.
BP, which took a $40.9 billion
pre-tax charge in 2010 related to the spill, hopes that the damage
claims should help it pay for tens of billions of dollars in
charges resulting from the spill, which consist of clean-up and
compensation costs.
Incidentally, both Cameron and Transocean have counter-sued BP.
According to reports, a federal trial is scheduled for next year to
assess the degree of fault and the quantum of liability that lies
with the companies.
Cameron and Transocean shares currently retain a Zacks #3 Rank,
which translates into a short-term 'Hold' rating whereas BP has a
Zacks #2 Rank (short-term Buy rating). Longer-term, we are Neutral
on all the three stocks.
Chipotle Beats Sales, Not Margins
Chipotle Mexican Grill, Inc. (NYSE: CMG) reported first
quarter 2011 earnings of $1.46, which
surpassed the Zacks Consensus Estimate of $1.43 and soared 22.7% from $1.19 in the prior-year quarter.
The company experienced strong top-line growth buoyed by higher
traffic count and new restaurant openings.
The fast food restaurant chain said that revenues rose 24.3 % to
$509.4 million, driven by new
restaurant openings and an increase in comparable-store sales. The
reported revenues also outperformed the Zacks Consensus Estimate of
$495 million.
Quarter Highlights
Comparable-store sales growth has been decelerating since
second-quarter 2008 – when it increased 7.1% – although it remained
positive, showing resilience in a sluggish environment.
After reaching the lowest point of 1.7% in the second-quarter
2009, comps have been on the rise. Comparable-stores sales climbed
12.4% in the quarter under review and surged from 4.3% in the
prior-year quarter.
Restaurant operating margin was down 90 basis points to 25.2%,
attributable to a 180- basis point (bp) (as a percentage of total
revenue) spike in food, beverage and packaging costs, and a 60-bp
rise in other operating costs, partially offset by a 80- bp drop in
labor and a 70-bp drop in occupancy.
Total operating margin plunged from 15.0% in the first quarter
of 2010 to 14.7% in the current quarter, due to higher restaurant
operating cost partially set off by a 10-bps dip in general and
administrative expenses, a 50-bp drop in depreciation and
amortization cost and a 10-bp decline in pre-opening cost.
Stores Update
During the quarter under review, Chipotle opened 12 restaurants.
It currently operates 1,095 outlets.
Chipotle has remained largely unruffled by the recent economic
slowdown. The company plans to open 135-145 new restaurants in
fiscal 2011.
Financial Position
Chipotle ended the quarter with cash and cash equivalents of
$282.9 million and shareholders'
equity of $862.7 million.
Outlook
For fiscal year 2011, management now expects mid single digit
comparable-store sales growth, as compared to its previous
expectation of low single digit growth.
Our Take
We believe Chipotle is well positioned to expand rapidly while
generating improved earnings margins and returns on invested
capital. With a strong balance sheet, consistent earnings, healthy
cash flow, excellent unit economics, international expansion and
continued marketing initiatives, we are of the opinion that the
stock provides relative safety and consistent growth.
The company has reported better-than-expected results. Hence, we
expect estimates to move up in the coming days. However, margins
are expected to remain under pressure due to food cost
inflation.
One of Chipotle's primary competitors California Pizza
Kitchen Inc. (Nasdaq: CPKI) will report its first quarter 2011
results on May 6, 2011.
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