Zacks Equity Research highlights Celanese Corporation (NYSE: CE) as the Bull of the Day and Hibbett Sports (Nasdaq: HIBB) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on CryoLife, Inc. (NYSE: CRY), Alpharma, Inc. (NYSE: ALO) and Ferrellgas Partners (NYSE: FGP).
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: Celanese Corporation (NYSE: CE)
Celanese has a strong growth strategy with development in Asia as a key factor. There are $400 million of free cash flow per year, primarily focused on share repurchase. Higher pricing on continued strong global demand for Acetyl Intermediates products, positive currency impacts, growth in Asia supported by the company’s new acetic acid unit in Nanjing, China are driving the company’s sales.
In addition, the company has leadership positions in oligopolistic markets that have solid fundamentals. As a result, we rate the shares a Buy with a target of $44.00.
Bear of the Day: Hibbett Sports (Nasdaq: HIBB)
The company’s sales continue to look pretty good, but that sales growth is coming at the expense of its profit margins. Compared to the second quarter of last year, its gross margin was down 40 basis points (bps) and its operating margin was down 80 bps. We continue to believe the difficult consumer spending environment will pressure the company’s results.
We maintain our Sell rating. Our target price is $16, which is about 16x our fiscal 2009 EPS estimate and in-line with the company’s long-term earnings growth rate.
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CryoLife, Inc. (NYSE: CRY)
CryoLife reported Q2 EPS that beat our estimate by $0.05 on revenue that also exceeded our forecast. We again increased our FY08 revenue and EPS estimates. We also increased our FY09 revenue and EPS estimates. The management revised its FY08 guidance.
CRY’s operations continue to show signs of improvement due to growing BioGlue sales, the continued growth in the tissue business and favorable margin and cost trends. Our target price of $16 is based on roughly 3.7x our FY09 revenue estimate.
The management anticipates that BioGlue sales in 2008 will continue to increase due to growth in domestic and international markets. In 2008, BioGlue revenue is expected to grow to a range of $47-$49 million from $43.9 million in 2007.
Alpharma, Inc. (NYSE: ALO)
On August 22, Alpharma, Inc. disclosed that it had received a buyout offer from King Pharmaceuticals, which was rejected by Alpharma’s Board of Directors. King had made an all-cash offer of $33 per share to Alpharma, which represents a 37% premium over the closing price of Alpharma common stock on August 21.
The shares shot up 43% on the news, and are now trading well above the $33 offer. We previously had a Sell rating on the stock based on concerns regarding prospects for key product, Kadian’s growth, as well as for the newly launched Flector Patch. However, we are moving Alpharma back to a Hold rating with a $37.50 price target following the announcement of King’s takeover bid. We expect the deal to close at a higher price than the current $33 offer. Our best guess is a deal closing between $35 and $40 per share.
Ferrellgas Partners (NYSE: FGP)
We are reiterating our Hold recommendation, price objective and earnings estimates on Ferrellgas Partners L.P. units. Sales volumes and earnings remain under pressure as the rising cost of propane squeezes gross margins and causes customer conservation. We are decreasing our 2008/2009 earnings estimates from $0.55 and $0.74 per unit to $0.47 and $0.63 per unit. The decrease is due to the negative effects of rising propane prices on gross margins.
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 per unit annualized).
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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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