Zacks Analyst Blog Highlights: Green Mountain Coffee, McDonald's, Lowes Companies, Allegheny Energy and Doctor Reddy's
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: Green Mountain Coffee Roasters,
Inc. (Nasdaq: GMCR), McDonald's (NYSE: MCD), Lowes Companies (NYSE:
LOW), Allegheny Energy, Inc. (NYSE: AYE) and Doctor Reddy's
Laboratories (NYSE: RDY).
See the latest posts to the Analyst Blog here:
http://www.zacks.com/blog/post_info.html?g=6
Here are highlights from Tuesday's Analyst Blog:
Green Mountain Plateaus a Bit
Green Mountain Coffee Roasters, Inc. (Nasdaq: GMCR) is a growth
company in the premium coffee and tea industry. Management is
implementing a growth strategy based on a multi-channel geographic
penetration business model. The company is expanding geographically
and by adding new relationships, such as with McDonald's (NYSE: MCD)
and Lowes Companies (NYSE: LOW).
Having generated 21 consecutive quarters of double-digit sales
growth and nine consecutive quarters with growth in excess of 25%, the
stock is fairly valued at a premium P/E. The stock is rated a Hold,
primarily because margins are under pressure due to rising input costs
and an unfavorable product mix shift.
Green Mountain Coffee Roasters is currently selling at 48.6 times
trailing 12-month EPS, reflecting the company's higher-than-average
growth profile, given the company's exposure to the attractive premium
coffee industry and successful business model. On March 5, 2008, Green
Mountain Coffee Roasters announced an 8% to 12% price increase for
coffee products. The pricing changes will be effective on orders
placed on or after May 5, 2008.
A Buy on Allegheny Energy
Going forward, Allegheny Energy, Inc.'s (NYSE: AYE) positive
investment factors include growing earnings, favorable market prices,
higher generation rates, increased retail sales long-term supply
agreements and a reinstated dividend. These positive factors are
partially offset by higher fuel expenses on account of higher coal
prices as well as higher operation and maintenance expenses.
We expect that the company's regulated delivery utility business
will provide steady earnings growth, while the generation business
will provide an additional boost to earnings. However, higher
environmental-related capital expenditures remain a concern.
Reinstatement of the company's quarterly dividend is certainly a
positive, although it currently yields a relatively unattractive 1.12%
-- lower than the electric power utility industry average yield.
However, we believe the sustainability of the dividend is
supported by higher operating cash flows as well as reasonable
projected earnings payout ratios. As of the date of this report, AYE
trades at 19.2x and 13.8x, respectively, our 2008 and 2009 earnings
per share estimates, or at a moderate premium to the electric power
utility industry average multiple and comparable diversified energy
utilities. Likewise, AYE trades at the upper-end of the ranges of its
industry peers based upon relative multiples of sales and book value,
yet roughly in-line with respect to multiples of cash flow.
Dr. Reddy's Now Rated Hold
Doctor Reddy's Laboratories (NYSE: RDY) is a global pharmaceutical
company located in Hyderabad, India. RDY produces active
pharmaceutical ingredients (API), finished dosage forms, and branded
and generic pharmaceutical products for the global market. Fiscal 2007
was a very strong year with the company witnessing both top- and
bottom-line growth.
Unfortunately, the lack of significant generic product launches,
intense pricing pressure in the generics market, and declining
revenues from the Mexico CPS and betapharm businesses have taken a
toll on the company's performance in fiscal 2008. We believe these
issues, along with the lack of significant near-term catalysts, will
hamper the company's performance in the coming quarters.
The stock had an impressive run over the past couple of years and
we had a Buy rating on Dr. Reddy's during this period. However, fiscal
2008 is proving to be a tough year for the company with results for
the first nine months of the year coming in well below expectations.
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