An update came out yesterday on Eni S.p.A. (E) in which senior energy sector analyst Santiago Burgaleta, CFA is restating his Hold rating on the company. We excerpted the following details:
'We are maintaining our Hold recommendation on Eni American Depositary Receipts (ADRs) after the company's second-quarter results. We continue to believe that the company's positive production-growth profile, capital discipline, and attractive dividend are adequately reflected in its premium valuation relative to its European peers.
'However, we are increasingly concerned with Eni's high valuation, relative to its historical norms and as production growth slows, the stock could come under significant pressure. At current levels, Eni ADRs are priced at 9.5x our 2007 earnings estimate, roughly inline its European peers: Statoil (STO) and Repsol (REP).
'Earnings momentum may come under pressure during the next quarters as production growth slows to average. Given the already rich valuation by historical standards, we believe ENI may experience some de-rating going forward. These developments have led us to rate the ADRs as a Hold.'
Read the full analyst report on E.
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