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Hess Corporation Slapped with Earnings-Induced Price-Target Cut

Analysts are largely bullish toward faltering HES

by 10/27/2011 11:30:51 AM
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Hess Corporation (HES - 63.27) took its turn in the earnings confessional before the open Wednesday morning. Hurt by lower production and a loss in its refining business, HES said its third-quarter profit fell 74% to $298 million, or 88 cents per share, from last year's earnings of $1.15 billion, or $3.52 per share. Excluding items, the oil and gas outfit reported a profit of $1.11 per share. Revenue, meanwhile, inched 2.5% lower to $8.73 billion. HES' results disappointed analysts' expectations for a profit of $1.36 per share on $9.68 billion in revenue.

This morning, UBS lowered its price target for HES to $79 from $83.

There could be additional price-target cuts in store for the New York City-based company. According to Thomson Reuters, the average 12-month price target for the stock rests at $86.67, which represents a sizable premium of 43.5% to yesterday's closing price of $60.38. Furthermore, 11 out of the 14 analysts interested in HES give it a "strong buy" endorsement.

Elsewhere on Wall Street, it seems that relatively few traders are betting on the stock to decline. Short interest for HES fell 25.3% during the past month. These bearish bets now account for just 1.6% of the security's float, representing a rather scant supply of sideline cash.

The options crowd, however, appears to be rather pessimistic toward HES. During the past 10 days, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 1.01 puts for every call on the stock. This ratio arrives four percentage points from an annual pessimistic peak -- signaling that traders on these exchanges have seldom made bearish bets over bullish at a faster pace over the past year.

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