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: Intersil Corp. (Nasdaq: ISIL), AGCO Corp. (NYSE: AG), United States Steel Corp. (NYSE: X), Peet’s Coffee & Tea, Inc. (Nasdaq: PEET) and ABM Industries, Inc. (NYSE: ABM).
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Here are highlights from Monday’s Analyst Blog:
Intersil Outlook Stays Neutral
We are maintaining our Hold rating on the shares of Intersil Corporation (Nasdaq: ISIL). June quarter revenue was in-line with consensus estimates, while the EPS exceeded. Forward guidance is for a 1-3% revenue increase in the next quarter.
Shares of Intersil are currently trading at a 14.3x multiple of our current 2008 earnings estimate (P/E). Intersil’s product breadth and increasing penetration indicate that it is relatively well positioned in the markets in which it operates. This could be a key factor in the next two years, if the recessionary trends continue. Recent acquisitions have augmented the product portfolio and increased the percentage of consumer and industrial products in the mix, which is a positive for revenue growth and margin expansion.
AGCO Sees Decent Growth Ahead
AGCO Corp. (NYSE: AG) reported second quarter EPS of $1.34, above our estimate at $0.90, due to a smaller-than-expected loss in North America and continued robust growth in South America and the EMEA [Europe, Middle East and Africa] region. The sales growth was broad-based, with every geographic region posting a double-digit sales increase. The growth in commercial farm income and acreage is driving demand for high-horsepower tractors.
While North America reported a loss, we expect a second half profit recovery on the back of favorable currency translation, higher margins, and double-digit sales growth. Our target price is $57, based on around 14.7x our 2008 EPS estimate of $3.87.
U.S. Steel Demonstrates Strength
United States Steel Corp.’s (NYSE: X) near-term profitability is expected to be strong due to higher flat-rolled contract prices and relatively low costs due to backward integration. The company also has strong cash flow, enabling increased dividend payments, stock buybacks and accelerated pension contributions. These factors lead us to rate the stock to a Buy with a six-month target price of $150.
Spot pricing is continuing to improve and is in the middle of a spike that started in early 2008. This is due to demand growth in China and other developing countries, high operating rates, rising input costs, a weak dollar and low inventories.
Peet's Coffee & Tea Value Steep
Peets Coffee & Tea, Inc. (Nasdaq: PEET) is a growth company in the premium coffee and tea industry. The management is implementing a growth strategy based on product quality and expansion through multiple channels of distribution. The company has exhibited consistent revenue growth since 2002; hence, the stock trades at a premium P/E.
Peet's Coffee & Tea is currently selling at 34.7 times trailing 12 month EPS, reflecting the company’s higher-than-average revenue growth profile. Revenue has grown at a 20.1% five year compound annual growth rate (CAGR). Over the last few years, the stock has traded in a P/E range of 30 to 54, though most price action has been contained within the 36 to 47 P/E range.
ABM Industries Within a Range
ABM Industries, Inc. (NYSE: ABM) reported third quarter operating EPS of $0.30 -- a 30% increase from the $0.23 reported in the comparable period last year -- due to cost synergies from OneSource and continued margin expansion in Engineering. For the full year 2008, OneSource remains on track to deliver $0.14 of earnings (ex. Integration costs) and $850 million of revenue.
The management lowered its FY08 adjusted EPS guidance to a range of $1.10 to $1.15, down from the prior range of 1.20 to $1.35. The company acknowledged a general decline in discretionary spending for some of its high-margin services. At 19x FY08 earnings, ABM shares look fairly valued. Our recommendation is to Hold shares of ABM.
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