Updated from 7:19 a.m. EDT
Each business day, TheStreet.com Ratings compiles a list of the top five stocks in five categories -- fast-growth, all-around value, large-cap, mid-cap and small-cap -- and publishes these lists in the Ratings section of our Web site.
This list is based on data from the close of the previous trading session. Today, large-cap stocks are in the spotlight. These are stocks of companies with market capitalizations of over $10 billion that rank near the top of all stocks rated by our proprietary quantitative model, which looks at more than 62 factors. In addition, the stocks must be followed by at least one financial analyst who posts estimates on the Institutional Brokers' Estimate System. The stocks are ordered by their potential to appreciate.
Note that no provision is made for off-balance-sheet assets such as unrealized appreciation/depreciation of investments, market value of real estate or contingent liabilities that might affect book value. This could be material for some companies with large underfunded pension plans.
is an independent energy company that explores for, develops and produces natural gas, crude oil and natural gas liquids. The company has interests in Argentina, Australia, Canada, China, Egypt, the U.K. and the U.S.
Apache has been rated a buy since January 2003. Fueled by record energy prices and an 8% jump in production, the company's earnings for the fourth quarter more than doubled year over year. Net income rose to $1.07 billion, or $3.19 a share, vs. $520.8 million, or $1.56 share, a year ago. Apache's total revenue surged 53% to $3.01 billion from $1.97 billion, driven by record production and strong commodity prices.
Looking forward to 2008, the company anticipates an earnings contribution from rising natural gas prices in Australia on growing demand in the domestic mining industry and in the liquefied natural gas export market. Apache's future performance depends, however, on its ability to achieve positive results from previous acquisitions. The company also faces challenges from increasing debt levels and comparatively low shareholder returns.
is an independent energy company that explores for oil and gas. The company also processes natural gas and develops, produces and transports oil, gas and natural gas liquids (NGLs). Additionally, the company markets natural gas, crude oil and NGLs. It has midstream operations constructing and operating pipelines, storage and treating facilities and gas processing plants. Devon's oil and gas properties are primarily in the U.S. and Canada, but the company also owns some properties in Azerbaijan, Brazil, China and Russia.
Our buy rating for Devon has not changed since September 2004. Our rating is based on the company's strong growth in revenue and net income, which are further supported by higher realized oil and natural gas liquids prices, rising production volumes, key divestitures and sound cash levels.
Devon's total revenue for the fourth quarter of 2007 surged 32% year over year to $3.2 billion, as the oil and natural gas liquids segments saw strong performance. Net income more than doubled to $1.32 billion, or $2.45 per share, compared to $582 million, or $1.11 per share, in the fourth quarter of 2006. The company's oil and natural gas liquids production grew 12% and 19% respectively. This aided the company's fourth-quarter performance, as did increases in the price for natural gas liquids and the realized oil price.
The company is currently making strategic divestitures that we feel help support our buy rating. Devon completed the sale of its operations in Egypt for an adjusted sales price of $341 million. In November 2007, the company announced an agreement to sell its operations in Gabon, and it is in the process of divesting its remaining assets and terminating all of its operations in West Africa.
Devon's future performance will be highly influenced by commodity prices. Any volatility in energy prices could affect the company's profitability and growth rates. The company also faces challenges from an increase in its debt level and a decline in return on equity, which could affect the company's growth going forward.
acquires, develops, exploits and explores oil and gas properties. The company also produces, processes, markets and transports oil and natural gas. XTO's proved reserves are located primarily in various regions of Alaska, Arkansas, Colorado, Kansas, New Mexico, Oklahoma, Texas and Wyoming. These fields are generally long-lived, with well-established production histories.
We have rated XTO Energy a buy since November 2001. We see its strengths in areas such as revenue growth, stock performance and increase in net income. For the fourth quarter of 2007, the company reported that its net income rose 8.2%, boosted by increased oil and natural gas production as well as higher energy prices. Net income increased to $464 million, or 95 cents a share, from $429 million, or 92 cents a share, a year ago. Revenue rose 33% to $1.59 billion, vs. $1.2 billion in the fourth quarter of 2006. Finally, XTO Energy witnessed record production, led by broad-based growth across all basins.
The company recently agreed to acquire $1 billion worth of oil and gas properties, which could help it reach significantly higher production and reserve targets. Looking ahead, the company raised its 2008 production growth target to 20%, up from its previous target of 18%. Bear in mind, however, that there are risks to our buy rating in that oil and gas prices are highly volatile and cyclical in nature.
explores for, develops, produces and markets natural gas and crude oil primarily in major producing basins in the U.S., Canada, offshore Trinidad, the U.K. North Sea and, from time to time, select other international areas. A substantial portion of EOG's U.S. and Canada natural gas reserves are in long-lived fields with well-established production histories. For fiscal 2007, production increased 11% over 2006, driven by the Fort Worth and Rocky Mountain operating areas.
EOG Resources has been rated buy since December 2005. For the fourth quarter of 2007, the company reported net income of $358 million, or $1.44 per share, vs. $237.2 million, or 96 cents per share, in the year-ago quarter. In addition, the company increased the quarterly cash dividend on its common stock to 12 cents a share, payable beginning April 30, 2008 to holders of record as of April 16, 2008.
Demand for oil and gas is continuously increasing in the U.S., even with oil prices that are notably above their historical averages. Together with rising prices, this increasing demand has encouraged production companies like EOG to increase their efforts to produce oil. Looking forward, the company plans to continue expanding its North American drilling program, and it expects significant production gains from the Fort Worth Barnett Shale and the North Dakota Bakken. Primarily because of expanded drilling operations in the latter, the company has increased its total crude oil and condensate production target growth.
Bear in mind that there are risks to our buy rating; oil and gas prices are highly volatile and cyclical in nature. The company is also subject to unforeseen occurrences such as blowouts, fires and loss of well control, which can destroy production facilities.
markets and administers supplemental health and life insurance through its subsidiary, American Family Life Assurance Company of Columbus. The company operates in the U.S. but derives the bulk of its business in Japan. Japanese operations accounted for over 70% of total revenue generated for 2007, and the operations' assets accounted for 82% of total assets as of the end of the year, according to the company. Most of Aflac's policies are individually underwritten and marketed through independent agents. Aflac is authorized to conduct business in all 50 states, the District of Columbia, several U.S. territories and Japan.
Aflac has been rated buy since November 2001, on the basis of the company's consistent revenue and earnings growth despite challenging market conditions. The company reported a 9% year-over-year increase in revenue during the fourth quarter of 2007. This revenue growth was helped by strong sales from Aflac U.S. operations. Net income for the quarter increased 15% to $383 million. Net sales grew to $4,017 million from $3,687 million in the third quarter of 2006. In addition, earnings per diluted share increased 16% to 78 cents.
Looking ahead, Aflac is expected to continue its strong performance in both the Japanese and U.S. markets on the back of expanding distribution channels and a strong product portfolio. Management is optimistic in its outlook for fiscal 2008 based on its full-year performance in fiscal 2007. The company predicts an increase in operating earnings per diluted share in the range of 13% to 15% year over year, and it also foresees its sales growth rate ranging between 3% and 7% for the year ahead.
However, Aflac is facing increased competition in Japan, as well as an industry-wide decline in sales of medicinal insurance products. Additionally, keep in mind that fluctuations in the yen/dollar exchange rate may negatively affect the company's future earnings.
Our quantitative rating is based on a variety of historical fundamental and pricing data and represents our opinion of a stock's risk-adjusted performance relative to other stocks.
However, the rating does not incorporate all of the factors that can alter a stock's performance. For example, it doesn't always factor in recent corporate or industry events that could affect the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company.
For those reasons, we believe a rating alone cannot tell the whole story and should be part of an investor's overall research.
Know What You Own
: XTO operates in the oil and gas industry, and some of the other stocks in its field include
. These stocks were recently trading at $64.58, +1.14%, $89.93, +0.36% and $79.96, +0.62% respectively. For more on the value of knowing what you own, visit TheStreet.com's
This article was written by a staff member of TheStreet.com Ratings.