Morning Commentary: China data provides small boost; preferreds mixed on oil oversupply

By Christine Van Dusen

Atlanta, Jan. 19 – Some preferred stocks improved slightly on Tuesday morning on better-than-expected economic data from China, but others remained under some pressure as oil prices seemed poised for another drop.

A new report from the International Energy Agency showed that oil supply is outpacing demand, which could put an “enormous strain on the ability of the oil system to absorb it efficiently.”

Unless something changes, the report said, “the oil market could drown in oversupply.”

In response to the current oil climate, commodity-related preferreds were mixed on Tuesday morning. Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) opened Tuesday at $4.43, down 7 cents.

But Vanguard Natural Resources LLC’s 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) opened stronger at $3.36, up 58 cents. And Legacy Reserves LP’s series B fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYO) moved up 25 cents to open at $2.51.

Market-watchers were also keeping an eye on banks, many of which recently released earnings that beat expectations.

Wells Fargo & Co.’s 5.85% series Q fixed-to-floating rate noncumulative perpetual preferreds (NYSE: WFCPQ) opened on Tuesday down 6 cents at $25.74 while its 5.2% class A series N noncumulative preferreds (NYSE: WFCPN) lost 23 cents, opening $25.12.

For the fourth quarter, San Francisco-based Wells Fargo posted a profit of $5.71 billion, or $1.03 per share. That was in line with year-ago figures and just slightly above analysts’ expectations of EPS of $1.02 a share. Revenue improved to $21.6 billion from $21.4 billion, due in part to the bank’s larger asset base.

Citigroup Inc.’s 6.875% series K fixed-to-floating rate noncumulative preferreds (NYSE: CPK) ticked up 2 cents to $27.49 while the 7.875% fixed-to-floating rate trust preferred securities (NYSE: CPN) were unchanged at $26.18.

For the quarter, Citi reported adjusted earnings per share of $1.06 on revenue of $18.64 billion. Analysts polled by Thomson Reuters were expecting EPS of $1.05 on revenue of $17.87 billion.

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