Zacks Equity Research highlights Humana (NYSE: HUM) as the Bull of the Day and Alpharma (NYSE: ALO) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Compuware (Nasdaq: CPWR), Intevac (Nasdaq: IVAC) and HSBC Holdings PLC (NYSE: HBC).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2676.
Here is a synopsis of all five stocks:
Bull of the Day: Humana (NYSE: HUM)
HUM is one of the largest publicly traded health benefit companies in the U.S. and Puerto Rico. The company recently reported better-than-expected 1Q08 net income of $80.2M (up 13% y/y), or EPS of $0.47, compared with net income of $71.2M, or EPS of $0.42 in 1Q08.
We believe previously disclosed issues of mispriced premiums and co-payments for its "enhanced" Medicare prescription-drug benefit plans are being addressed, as reflected by management’s upward revision of FY08 EPS guidance, and retain our Buy recommendation at current levels.
Bear of the Day: Alpharma (NYSE: ALO)
With the sale of the generics and API business segments, Alpharma is focusing on establishing itself as a specialty pharmaceuticals company. We expect 2008 to be another transitional year for the company with earnings declining significantly mainly due to increased SG&A spend related to the launch of Flector Patch. In the absence of any potential catalysts, investor focus will remain on the acceptance and ramp-up of Flector Patch. Although we expect earnings to rebound in 2009, we remain concerned about Kadian’s growth prospects and the sales ramp of Flector Patch. We rate the stock a Sell with a $20 price target.
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Compuware (Nasdaq: CPWR)
Compuware reported revenues of $338.9 million in the fiscal fourth quarter, up 8.2% from a year ago and up 9.6% sequentially. The revenue growth was broad-based. In particular, software license fees grew 37.6% year over year to $100.8 million and were up 26.9% sequentially. The company incurred a restructuring charge of $1.9 million or $0.00 per share.
CPWR continues to transform its business and expects that restructuring activities undertaken in fiscal 2008 will reduce operating costs by approximately $100 million on an annualized basis. Going forward, management expects to generate a revenue growth of 5%-10% in fiscal 2009 while EPS is estimated to grow 20%-30% compared to fiscal 2008.
Ferrellgas (NYSE: FGP)
We are reiterating our Hold recommendation, price objective, and earnings estimates on Ferrellgas units ahead of the propane partnership's fiscal third-quarter results. We continue to believe that current valuation adequately reflects the partnership's lack of distribution-growth prospects, continued margin pressures and a relatively weak balance sheet.
As expected, the partnership kept its quarterly cash distribution unchanged for the third quarter at $0.50 per unit ($2.00 per unit annualized). Our unchanged $21 price objective reflects no distribution growth and a yield assumption of 9.52% approximately 502 basis points above our 10-year treasury rate forecast of 4.5%.
HSBC Holdings PLC (NYSE: HBC)
We are continuing our Hold on HSBC Holdings, but raising our target price to $85. In its first quarter trading update, HSBC noted that profits were ahead of the year-ago quarter as solid results in its emerging markets and European businesses were partly offset by weaker US profits due to higher consumer finance loan impairments and additional write-downs in Global Banking and Markets.
We are maintaining our 2008 EPADS estimate at $7.00, and initiating our 2009 estimate at $8.00. Earnings should reflect strong loan and deposit growth, especially in emerging markets and improved productivity, partially offset by increased impairment charges due to problems in the US subprime and other credit markets.
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About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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