We maintained our Neutral recommendation on Eni SpA (E) on Jan 8, 2014. With the expected strengthening of the global economy, we foresee ample opportunities for Eni to gain profitability in the coming quarters. Furthermore, the significant discoveries in Mozambique, Cyprus, Congo, Ghana and Pakistan will continue to contribute to earnings strength. However, the positives are partially mitigated by a weak economy in Europe, which is likely to affect its performance going forward. Eni carries a Zacks Rank #5 (Strong Sell).
Why Maintained?
We believe that Eni’s outlook for the upcoming months is favorable, given its 2013–2016 strategic plans to enhance production and implement steps to control costs and recover profitability. The company remains upbeat on its production growth target of more than 4% growth annually in the said period and 3% annually until 2022.
Given the commissioning of major projects like Kashagan in Kazakhstan as well as other assets including the Angola liquefied natural gas and the gas assets in Algeria, Eni remains optimistic about its future growth. Moreover, stepped-up production at the fields commissioned last year also raises our optimism on Eni’s assured profitability over the coming quarters.
Project start-ups, input from big projects in Algeria, Iraq, Australia, Russia and Egypt, as well as the company’s strategic position in non-conventional gas, are expected to augment volumes going forward.
The company is concentrating on the fast-track development of conventional and synergic oil assets. Eni’s recent discoveries go to show the importance of the international region in its strategic growth policy and fortify its position worldwide.
However, Eni believes that the Gas & Power division is likely to remain stressed due to considerable competition and saturation in the Italian market. For 2013, retail volumes in the domestic market are expected to weaken due to the likely reduction in demand for the domestic use of fuels. The company plans to shut down the Venice plant in order to start the Green Refinery project.
Stocks That Warrant a Look
Not all companies are expected to underperform the market like Eni SpA. One can consider Zacks Ranked #1 (Strong Buy) stocks CVR Refining, LP. (CVRR), Cheniere Energy Partners L.P. (CQP) and CNOOC Ltd. (CEO) as good buying opportunities for the short term.
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment