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CHICAGO--(BUSINESS
WIRE)--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: Yum! Brands Inc. (NYSE: YUM), Caterpillar Inc. (NYSE:
CAT), United Parcel Service, Inc. (NYSE: UPS), Northrop Grumman
Corporation (NYSE: NOC) and DuPont (NYSE: DD).
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Here are highlights from Wednesday’s Analyst
Blog:
YUM Expanding Rapidly Overseas
Shares of Yum! Brands Inc. (NYSE: YUM) are a great way to gain
exposure to China’s booming economy and other
fast-growing international markets, while investing in the only stable segment
of the restaurant industry. Yum! Brands’ two overseas
divisions are expanding rapidly.
China and YRI are on track to grow operating earnings by an average compound
annual growth rate (CAGR) of 20% and 10%, respectively, over the next five
years. The U.S. operations are also showing signs of revival as same-store sales
turned positive in 1Q08. Reinvigorating sales was Taco Bell’s recent product launches, including fruit smoothies and a
value menu. KFC U.S. remains Yum’s one weak spot, with
an outdated menu. Key to improvement will be its 1H09 launch of a new grilled
chicken line, the first step in Yum’s strategy to add
healthier and more portable menu items.
Target $78 for CAT
Caterpillar Inc. (NYSE: CAT) reported second quarter EPS of $1.74,
above our expectations of $1.52, due to a lower share count, increased price
realization, and higher International sales volume. The company remains
committed to capacity expansion in growth markets outside the U.S., which
positions CAT to increase share in mining and energy-related equipment.
Our FY08 EPS estimate of $6.41— which is above the
management’s guidance — assumes
30% revenue growth in the Middle East, Asia Pacific, Latin America, no growth in
North America and a share count of 608 million. Our target price is $78.00.
UPS Undervalued
We are continuing our Buy on United Parcel Service, Inc. (NYSE: UPS),
as the stock is undervalued, but cutting our target price to $75. UPS reported
second quarter EPS of $0.85, in line with earnings guidance provided on June 23.
We are decreasing our EPS estimates for 2008 to $3.60 from $4.05, the midpoint
of the company’s revised EPS guidance of $3.50 to
$3.70, reduced from $3.90 to $4.20, and to $4.15 from $4.65 for 2009.
While the weaker U.S. economy, slowing US volume growth, the shift away from
premium products, increased fuel costs and higher interest expenses related to a
$6.1-billion pension payment will be earnings drags, rate hikes, expansion into
China, recent acquisitions, and share repurchases should propel EPS growth. In
January, UPS instituted a two-year, $10-billion share repurchase plan and
announced a 7% increase in the dividend.
Bullish Outlook for NOC
Northrop Grumman Corporation (NYSE: NOC) offers a strong program
portfolio positioned to take advantage of high growth areas in the defense
budget, an improving balance sheet and an ongoing share repurchase program.
Favorable projected revenue, the acquisition of Scaled Composites, diversified
revenue and earnings streams with strong growth and discounted relative
valuation metrics collectively support our bullish outlook for NOC.
Accordingly, we maintain our Buy recommendation on NOC common stock with a
six-month target price of $76.00. Price appreciation to our near-term valuation
target coupled with the recently increased $0.40 per share quarterly dividend,
which we deem secure and sustainable based upon low projected payouts represents
38.9% total return potential.
Agri-Market Boost for DuPont
Growth for DuPont (NYSE: DD) will be driven by non-G7 markets,
agricultural chemicals and a focus on key customers and new products. Strong
performance in the agricultural products market, emerging markets, pricing
actions, favorable currency and productivity is likely to outweigh increasing
costs as well as weak auto and housing markets.
The company is focusing on nearly doubling its earnings growth rate. However,
slowing demand in U.S. markets is likely to offset growth in agriculture and
other markets outside the U.S. This compels us to rate the stock a Hold with a
target of $45.00.
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