Oil expert predicts lower short-term Arco earnings, but a positive long-term outlook.Oil expert predicts lower short-term Arco earnings, but a positive long-term outlook One of the oil industry's top analysts has reduced his estimate of 1990 earnings at Atlantic Richfield Co. from $9.65 a share to $9.15 a share. Eugene L. Nowak, senior vice president of Dean Witter Reynolds Dean Witter Reynolds was an American stock brokerage catering to the middle class. In 1997, it merged with the Morgan Stanley Group to form Morgan Stanley Dean Witter. The amalgamated firm is now known as Morgan Stanley. Inc.'s energy group, however, maintained his buy/hold rating for Arco based on the company's long-term fundamentals. "We continue to believe that Arco can show per-share earnings growth of 10 percent per annum Per annum Yearly. over the next five years under the scenario of rising crude prices," Nowak wrote in his report released late last month. "Further, we believe management will continue to enhance shareholder value by possible further restructuring, upgrading operations, share buybacks and consistent dividend increases." Nowak also estimated reduced 1991 Arco earnings from $10.35 to $9.85 a share. Nowak said Arco's stock may underperform Underperform An analyst recommendation that means a stock is expected to do slightly worse than the market return. Also known as market underperform, moderate sell, or weak hold. in the short term. He estimated earnings of $2.10 to $2.15 a share in the second quarter of 1990, compared with earnings of $2.61 a share in the second quarter of 1989. He predicted that third-quarter 1990 earnings will be $1.95 a share this year, compared with $2.19 a share in 1989. "We are maintaining our buy/hold rating, but with a decided long-term emphasis," said Nowak. "In the short term, we expect stock performance to be restricted by interim earnings pressures. A move in stock price to the $110 to $112 a share range would not be surprising, particularly if the general market corrects and OPEC OPEC: see Organization of Petroleum Exporting Countries. OPEC in full Organization of the Petroleum Exporting Countries Multinational organization established in 1960 to coordinate the petroleum production and export policies of its continues to overproduce o·ver·pro·duce tr.v. o·ver·pro·duced, o·ver·pro·duc·ing, o·ver·pro·duc·es To produce in excess of need or demand. o ." Arco's 52-week high is $120 3/8. It 52-week low is $90 7/8. The stock is currently in the $115 range. Nowak listed nine reasons why Arco was a fundamentally sound long-term investment: * Attractive valuation. * Above-average yield of 4.3 percent. * Continued active stock buyback Stock buyback A corporation's purchase of its own outstanding stock, usually in order to raise the company's earnings per share. stock buyback See buyback. of the company. * Strong oil/gas production profile over the next five years. * Good exploration prospects in Alaska. * Excellent oil and gas acquisition/finding-cost performance. * Positive restructuring activities of Arco Chemical and Lyondell Petrochemical petrochemical, any one of a large group of chemicals derived from a component of petroleum or natural gas. The cracking processes for manufacturing gasoline produce vast quantities of gaseous hydrocarbons. . * Possible restructuring of Arco Oil and Gas. * Strong finances. |
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