Let’s take a look at some of the top stories from around the markets, including a number of energy-related headlines and what Home Depot sees in its near-term outlook.
By Kris Rosemann
Crude oil prices (USO) continue their recent slide as oversupply fears creep back into the fore. OPEC recently cut its forecast for 2019 global oil demand growth for the fourth consecutive month, and the cartel expects supply growth from non-OPEC countries to exceed demand growth in the year. OPEC noted that its expectations for oil demand growth to slow relative to prior forecasts goes hand in hand with recent downward revision in the IMF’s recent reduction in global economic growth estimates. President Trump continues to target Saudi Arabia (KSA) with his blame for oil prices being as high as they are after recent sanctions were imposed on Iran, OPEC’s third largest producer.
As it relates to longer-term energy resource demand profiles, the IEA expects natural gas (UNG) to overtake coal (KOL) as the world’s second largest energy source behind oil by 2030 alongside efforts to reduce air pollution. Such a push could bode well for natural gas producers in the US as the country could account for 40% of total gas production growth through 2025, and emerging economies in Asia will likely continue to rely on imports to satisfy demand. China, the world’s third-largest consumer of natural gas behind the US and Russia, currently has to import roughly 40% of its natural gas demand, and emerging Asian economies are expected to account for approximately half of total global gas demand growth by 2040, while their share of liquefied natural gas imports is expected to double to 60%.
In other energy-related news, General Electric (GE) is accelerating plans to monetize a portion of its stake in Baker Hughes (BHGE) with a series of long-term agreements that amend the commercial and technological relationships between the companies. Among those agreements was a release from the lock-up restrictions that previously kept GE from ridding itself of its stake in Baker Hughes until July 2019, as well as a sale by GE of a part of its stake into the market and a repurchase of another portion of GE’s stake by Baker Hughes. These transactions are expected to maintain GE’s stake above 50%, but they also serve as a reminder of the recent strategic missteps taken at GE that resulted in the firm needing to monetize assets to shore up its financial position.
Home improvement retail giant Home Depot (HD) turned in a solid third quarter report before the open November 13, and the company raised its full-year guidance for sales, comparable sales, and diluted earnings per share. In its outlook, management noted ongoing strength in the US economy, consumer sentiment remaining near all-time highs, and low unemployment levels. Housing related metrics are moderating, but drivers of home improvement spending remain intact, including home price appreciation, an ageing housing stock, household formation, and housing turnover. Though the company noted the regional nature of housing markets in terms of price appreciation and affordability, it continues to expect home prices to rise in 2019.
Related: XLE, LOW
—–
Valuentum members have access to our 16-page stock reports, Valuentum Buying Index ratings, Dividend Cushion ratios, fair value estimates and ranges, dividend reports and more. Not a member? Subscribe today. The first 14 days are free.
Kris Rosemann does not own shares in any of the securities mentioned above. Some of the companies written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.