Tuesday Losers: Anadarko, Regal Cinemas and Halozyme

David Sterman's picture

Tuesday, June 1, 2010 - 11:15am

by David Sterman

Among the biggest losers in Tuesday's early trading are Anadarko Petroleum (NYSE: APC), Regal Cinemas (NYSE: RGC) and Halozyme Therapeutics (Nasdaq: HALO).

Top Percentage Losers -- Tuesday, June 1, 2010
Company Name (Ticker) Intra-Day Price Intra-Day
% Loss
52-Week High 52-Week Low
Anadarko (NYSE: APC) $44.07 -15.8% $75.07 $40.28
Regal Cinemas (NYSE: RGC) $14.30 -5.1% $18.49 $10.58
Halozyme (Nasdaq: HALO) $6.97 -4.9% $32.71 $18.17

*Table includes companies with minimum market capitalizations of $200 million and three month trading volumes of at least 100,000 shares. All percentage returns are listed as of 10:58AM Eastern Standard Time. Click on ticker symbols for up-to-the-minute price quotes and percentage gain dat

Drillers with Highest Gulf Exposure Hit Hardest

Shares of BP (NYSE: BP) are getting pummeled again, off another -11% on Monday as investors come to doubt that the flow of oil and gas can be stopped in the near term. The longer it proceeds, the greater the potential liability for the company. Rumors circulated that BP may become takeover bait, but it’s unclear why anyone would want to step in and assume this mess.

The broader sector is also getting hit, especially for those oil and gas drilling service companies with the highest amount of exposure to the Gulf. Anadarko Petroleum (NYSE: APC), for example, is off nearly -15% on the session and has fallen from around $75 per share to the mid $40s in just six weeks. Back then, the stock was approaching two-year highs on the heels of very strong March quarter results: The $0.83 in per-share profits nearly doubled the analyst forecast.

The question then is if all of the problems will cause profits to slump sharply in coming quarters. Oppenheimer’s Fadel Gheit, a long-respected oil analyst on the street, recently lowered his expectations. He now thinks Anadarko will earn around $2.24 a share this year, down from a previous view of $2.53. The 2011 per share profit forecast was lowered about -20% to around $3. His new view is in line with the consensus forecast, though the consensus is likely to come down as well. Notably, analysts are all over the map, with some seeing more than $6 in 2011 per share profits, with others seeing profits closer to $1 a share.

And that highlights the conundrum for investors. Nobody can really say how the current Gulf spill will play out. We know costs will rise as added safety measures are taken, and we may see a boost in natural gas prices and therefore revenue if planned new production is likely to be stalled. But it’s foolish to bottom-fish shares until we get a little more clarity.

If you want to compile a list of the hardest hit stocks, look at Tetra Technologies (NYSE: TTI), Hercules Offshore (Nasdaq: HERO), and Dril-Quip (NYSE: DRQ). All of these companies provide services and equipment to the big drillers, and all have seen their shares fall another -10% today.

Action to Take --> These stocks will eventually look like a bargain, but we’re not there yet.


Volatility and M&A Don’t Mix

The biotech sector has seen a slew of deal-making in recent months, thanks in large part to a positive market backdrop. But the market’s choppy sledding of recent sessions appears to have put an end to the sector’s M&A party for the moment. Micro-cap CombiMatrix (Nasdaq: CBMX) conceded as much by announcing today that its bankers are no longer looking to do deals, pushing shares down double-digits.

Other biotechs that were rumored to be on the block are also getting hit: Halozyme Therapeutics (Nasdaq: HALO), which is already reeling from a recent drug recall, is off another -5% today. Meanwhile, Affymax (Nasdaq: AFFY), which is developing a treatment for anemia, is off nearly -8%. Buyout rumors are getting little credence in this market

Action to Take --> Biotech stocks had posted a strong run, with the Biotech HOLDRS (AMEX: BBH) exchange-traded fund (ETF) rising sharply in February and March. Performance has sharply lagged since then, as investors flee stocks with minimal near-term profit prospects. Now that the “M&A play” is not a factor, the group could fall further. Only when the market stabilizes and starts trending upward will the group see some interest. If you were looking at any biotechs, simply keep monitoring them. Be ready to pounce when the market firms.


Regal Cinemas Reflects Box Office Slump

For the second straight weekend, movie attendance trailed analysts’ forecasts. And that’s hitting shares of Regal Cinemas (NYSE: RGC), which are off more than -4% in Monday trading. As we noted last week in our look at Carmike Cinemas (Nasdaq: CKEC), ever-rising ticket prices are starting to make going to the movies a costly family outing. This summer offers plenty of family-friendly fare, but if box office results disappoint in the all-important summer season, then investors may start to focus on the balance sheets. Regal currently has about $2 billion in debt. And though Regal should see few near-term liquidity concerns, this is precisely the kind of stock that gets dumped in recessionary times.

Action to Take --> If you believe the economy may stall in coming quarters, then you should lighten your positions in any stocks that carry lots of debt. Their debt loads may be manageable, but as we saw in 2008 and 2009, investors tend to steer clear of these names when the economy contracts.

David Sterman does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.