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The Zacks Analyst Blog Highlights: Cliffs Natural Resources, Baker Hughes, Halliburton, Schlumberger and Core Laboratories

CHICAGO, Dec. 24, 2013 /PRNewswire/ -- 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 the Cliffs Natural Resources (NYSE:CLF-Free Report), Baker Hughes Inc. (NYSE:BHI-Free Report), Halliburton Co. (NYSE:HAL-Free Report) Schlumberger Ltd. (NYSE:SLB-Free Report) and Core Laboratories N.V. (NYSE:CLB-Free Report).


Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Monday's Analyst Blog:

Cliffs Upped to Strong Buy

On Dec 20, Zacks Investment Research upgraded mining company Cliffs Natural Resources (NYSE:CLF-Free Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Cliffs reported third-quarter 2013 earnings from continuing operations of 65 cents per share, up 6.6% from 61 cents reported in the year-ago quarter. Profit from discontinued operations was 1 cent per share compared with a loss of 2 cents in the year ago quarter. Consolidated net income rose roughly 23% year over year to $104.3 million (or 66 cents per share) from a profit of $85.1 million (or 59 cents).

Sales for the quarter came in at $1,546.6 million, up 0.1% from $1,544.9 million in the prior-year quarter. A 17% rise in global seaborne iron ore pricing led to increased sales in the quarter.

Cliffs has implemented a strategic capital allocation plan to ensure optimum utilization of cash. Its focus remains on providing maximum return to the shareholders by way of dividend distribution while maintaining its organic growth pipeline. The company is also pursuing cost management amid a weak pricing environment, reflected by the narrowing of its SG&A (selling, general and administrative) and exploration costs targets for 2013 and cost reductions in its North American Coal operation.

In addition, Cliffs is boosting its mining and transportation capacity globally. It is in the process of manufacturing lower silica and premium grade iron ore concentration products at its Bloom Lake iron ore operation in Eastern Canada. This is expected to attract new customers and boost the mine's profitability. Cliffs has also employed a global exploration program aimed at identifying and capturing new world-class projects.

The Zacks Consensus Estimate for 2013 for Cliffs has gone up 9.2% to $2.97 per share as all estimates were revised higher over the last 60 days. The Zacks Consensus Estimate for 2014 has also risen by 33.8% to $1.98 over the same period.

U.S. Drilling Rig Count Falls

In its weekly release, Houston-based oilfield services company Baker Hughes Inc. (NYSE:BHI-Free Report) reported a dip in the U.S. rig count (number of rigs searching for oil and gas in the country). This fall can be traced back to a decrease in the tally of oil-directed rigs, partially offset by higher gas rig count.

The Baker Hughes' data, issued since 1944, acts as an important yardstick for energy service providers in gauging the overall business environment of the oil and gas industry.

Analysis of the Data

Weekly Summary: Rigs engaged in exploration and production in the U.S. totaled 1,768 for the week ended Dec 20, 2013. This was down by 14 from the previous week's rig count and indicates the first decrease in 4 weeks.

Despite this, the current nationwide rig count is more than double the lowest level reached in recent years (876 in the week ended Jun 12, 2009), though it is still below the prior-year level of 1,774. It rose to a 22-year high in 2008, peaking at 2,031 in the weeks ending Aug 29 and Sep 12.

Rigs engaged in land operations descended by 16 to 1,687, offshore drilling was up by 2 to 61 rigs, while inland waters activity remained steady at 20 units.

Natural Gas Rig Count: The natural gas rig count – which, earlier this year, slumped to its lowest point since Jun 1995 – increased for the second time in 3 weeks to 372 (a gain of 3 rigs from the previous week). Despite the weekly growth, the number of gas-directed rigs is down by 54% from its 2012 peak of 811.

In fact, the current natural gas rig count remains 77% below its all-time high of 1,606 reached in late summer 2008. In the year-ago period, there were 429 active natural gas rigs.

Oil Rig Count: The oil rig count – that rocketed to a 25-year high of 1,432 in Aug last year – fell by 16 to 1,395. Nevertheless, it has recovered strongly from a low of 179 in Jun 2009, rising 7.8 times.

Miscellaneous Rig Count: The miscellaneous rig count (primarily drilling for geothermal energy) at 1 was down by 1 from the previous week.

Rig Count by Type: The number of vertical drilling rigs fell by 2 to 405, while the horizontal/directional rig count (encompassing new drilling technology that has the ability to drill and extract gas from dense rock formations, also known as shale formations) was down by 12 to 1,363. In particular, horizontal rig units – that reached an all-time high of 1,193 in May 2012 – decreased by 5 from the last week's level to 1,140.

Gulf of Mexico(GoM): The GoM rig count was up by 2 to 59. Both oil and gas rigs improved upon their week-ago levels by 1 to 39 and 20, respectively.


A Key Barometer of Drilling Activity: An increase or decrease in the Baker Hughes rotary rig count heavily weighs on the demand for energy services – drilling, completion, production etc. – provided by companies that include large-cap names like Halliburton Co. (NYSE:HAL-Free Report) and Schlumberger Ltd. (NYSE:SLB-Free Report). However, our preferred pick in this group is Core Laboratories N.V. (NYSE:CLB-Free Report). The Amsterdam, Netherlands-based firm – sporting a Zacks Rank #2 (Buy) – has a solid secular growth story with potential to rise from the current level.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

About Zacks Equity Research

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