The Zacks Analyst Blog Highlights: Toyota Motor, Nissan Motor, Honda Motor, Energy XXI (Bermuda) and EPL Oil & Gas

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Mar 14, 2014, 09:30 ET

CHICAGO, March 14, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Toyota Motor Corp. (NYSE:TM-Free Report), Nissan Motor Co. Ltd. (OTC:NSANY-Free Report), Honda Motor Co., Ltd. (NYSE:HMC-Free Report), Energy XXI (Bermuda) Ltd. (Nasdaq:EXXI-Free Report) and EPL Oil & Gas Inc. (NYSE:EPL-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Thursday's Analyst Blog:

Japanese Automakers Raise Wages

Japanese automakers Toyota Motor Corp. (NYSE:TM-Free Report), Nissan Motor Co. Ltd. (OTC:NSANY-Free Report) and Honda Motor Co., Ltd. (NYSE:HMC-Free Report) have decided to increase the base pay of workers, following the Prime Minister's efforts to convince employers of the same. For the first time since the recession in 2008, Toyota is raising the base pay of the Toyota Motor Workers' Union members by 0.8% of last year's average salary or 2,700 yen ($26) per month. This is lower than the union's demand of a hike of 4,000 yen.

However, the automaker will also increase average wages by 7,300 yen due to seniority or promotions. Thus, the total raise comes to about 2.9%. Additionally, Toyota accepted the union's request to increase the average bonus to 2.44 million yen, which is also the highest since 2008. The Toyota Motor Workers' Union represents over 50,000 workers.

Meanwhile, Nissan agreed to increase the base wages by 3,500 yen and bonuses to 5.6 months of salary. Honda will increase the monthly base wage by 2,200 yen. However, Suzuki Motor Corp. is not raising its employees' wages, according to media reports.

The Japan Confederation of Automobile Workers' Unions revealed that more than 1,000 auto unions requested for wage increases this year. Moreover, the Japanese government is encouraging wage hikes to counter deflation.

Earlier this month, the Japanese labor ministry revealed that base pay excluding bonuses and overtime inched up 0.1% in January. This is the first year-over-year increase in 22 months. However, the overall pay declined 0.2% during the month.

While wage increases will help people to meet the increasing taxes and policies implemented by the government to fight deflation, the amount of increase might not be enough. Nevertheless, sustained economic growth will result in further wage hikes.

Toyota and Honda currently carry a Zacks Rank #2 (Buy). Nissan holds a Zacks Rank #3 (Hold).

Energy XXI Buying EPL to Create GoM Giant

Domestic oil and gas explorer Energy XXI (Bermuda) Ltd. (Nasdaq:EXXI-Free Report) has agreed to acquire smaller rival EPL Oil & Gas Inc. (NYSE:EPL-Free Report) for about $2.3 billion in stock, cash and debt. Following the announcement, shares of EPL surged 30%, while those of Energy XXI fell about 6%.

Both companies, based in Houston, are upstream players engaged in the exploration and development of crude oil and natural gas resources in the U.S. Gulf of Mexico (GoM) shelf. The deal will create the largest publicly-owned independent oil producer in the region's shallow water, with 10 oilfields, daily production of approximately 65,000 barrels of oil equivalent and an enterprise value of $6 billion.

The transaction has been okayed by the boards of both companies but awaits regulatory and shareholder approval. We expect the buyout to conclude by June 1 following which the current stockholders of Energy XXI will own approximately 77% of the combined company, with EPL shareholders owning the rest. The resulting entity – to be headquartered in Houston – will be led by Energy XXI Chairman and CEO John Schiller, while one EPL director will join the enlarged board.

Under the terms of the agreement, EPL shareholders will receive $25.35 in cash and 0.584 shares of Energy XXI for each share they hold. This combination of cash and stock values EPL shares at $39 apiece, a 34% premium to the pre-announcement closing price. The cash component of the deal is worth about $1 billion, while equity contribution will total around $500 million. Additionally, Energy XXI will assume $707 million in debt.

The acquisition – Energy XXI's largest in more than three years – will allow the GoM pure play widen its presence in the central shallow water region, thereby lowering capital costs and improving operating efficiencies. In particular, as access to new energy resources in the GoM becomes more difficult, Energy XXI, like most of its peers, has been facing headwinds to replace its reserve base and grow production. The EPL buy will help Energy XXI to overcome this problem.

Both EPL and Energy XXI retain a Zacks Rank #3 (Hold), implying that they are expected perform in line with the broader U.S. equity market over the next one to three months.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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