When it rains, it pours, even in the world of analyst updates, of which there is no shortage today. We went digging and here are five updates we couldn't wait to share with you this afternoon.
AP Rio Tinto (RIO) was named a Top Pick in European Metals and Mining by Bernstein's Paul Gait who noted that Rio's cash generation continues to surprise the market and wrote:
Top line surprises combined with Rio throttling back on capital expenditure will drive a gap between cash flow generation and outflows. We see no reason why the resultant de-gearing of Rio’s balance sheet should not see its dividend double. Benefits come at a surprisingly low cost: Rio offers 17% real return versus nominal sovereign debt yield of 4%. Rio has one of the highest quality industrial asset bases in the world…
Master limited partnership Dominion Resources (D) grabbed our attention after UBS analyst Julien Dumoulin-Smith upgraded it to Buy from Neutral and lifted the price target to $72 from $63 on anticipation that a “mid-year spin of the MLP” will generate about $4 per share in value. "We see capacity to drive double digit distribution growth through the decade," Dumoulin-Smith wrote. Dominion is scheduled to report earnings sometime between Jan. 27 and 31.
Valero Energy (VLO) will report earnings on Jan. 29 and analyst Ann Kohler of Imperial Capital is bullish on them today. She raised the oil company's price target to $49 from $41 and maintained an In-Line rating. In the note, Kohler wrote:
Due to improved crude price differentials, and thus expectations of refinery throughput at the top of management's guidance, we estimate that Valero will report adjusted fourth-quarter 2013 income of 97 cents, up from our previous estimate of 60 cents.
McDonald's (MCD) made the list after Morgan Stanley's John Glass upgraded it to Overweight (hold your sarcasm) calling it, "one of few laggards with underappreciated competitive advantages." McDonald's will report earnings on Jan. 23.
We've saved Monsanto (MON) for last. The sometimes controversial, often inflammatory maker of agriculture "stuff" was downgraded by JPMorgan today after reporting a quarterly profit of $368 million, or 69 cents a share on revenue of $3.14 billion, beating analysts' expectations of 64 cents a share on revenue of $3.08 a share.
In the note, Jeffrey Zekauskas wrote that the domestic price of corn is at risk this year:
In the event of an above-average or normal harvest with the corn stocks-to-use ratio now at 13.7% possibly limiting Monsanto's pricing power. Likely lower planted corn acres in the United States and Brazil will challenge Monsanto to increase corn seed volumes in fiscal 2014. Glyphosate prices and earnings may peak in the first half of 2014 and then come under pressure in the second half or in fiscal 2015 given negative China price trends.
We made a quick check and as of 3pm, the companies were trading like so: Dominion Resources has gained 2.5$% to $66.36 at 3:23 p.m., McDonald's has ticked up 0.1% to $95.47 and Valero has advanced 1.9% to $52.85. Monsanto has dropped 2.7% to $112.08 and Rio Tinto has fallen 2.3% to $51.21.
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