Avaya, Cisco and 3COM CHICAGO--(BUSINESS WIRE)--April 28, 2006 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: Owens-Illinois (NYSE:OI), Silgan Holdings (Nasdaq:SLGN), Avaya (NYSE:AV), Cisco (Nasdaq:CSCO) and 3COM (Nasdaq:COMS). See the latest posts to the Analyst Blog by visiting http://at.zacks.com/?id=2673 Here are highlights from Thursday's Analyst Blog: No Surprises from Bernanke Federal Reserve Chairman Ben Bernanke did not say anything surprising in prepared remarks before the Joint Economic Committee. Nor did he provide any meaningful insight as to whether rates would or would not be raised at the June meeting. The Chairman provided an upbeat analysis and outlook of the economy, though he warned about potential problems from rising energy prices and tightening labor markets. He also told Congress to start focusing on fiscal responsibility. Specifically, he stressed the importance of finding a balance between tax policy and government spending. As for the elephant in the room - interest rates, Bernanke was noncommittal: In the statement issued after its March meeting, the FOMC noted that economic growth had rebounded strongly in the first quarter but appeared likely to moderate to a more sustainable pace. It further noted that a number of factors have contributed to the stability in core inflation. However, the Committee also viewed the possibility that core inflation might rise as a risk to the achievement of its mandated objectives, and it judged that some further policy firming may be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance. In my view, data arriving since the meeting have not materially changed that assessment of the risks. To support continued healthy growth of the economy, vigilance in regard to inflation is essential. In other words, interest rates may or may not be increased at the June meeting. For those who had a preconceived notion of where rates are headed, today's testimony did nothing to change their opinions. Owens-Illinois a Hold Owens-Illinois (NYSE:OI) reported first quarter EPS of $0.14, below year-ago earnings of $0.37, on account of rising raw material costs, escalating energy prices, and negative currency translation. Regrettably, overhead and manufacturing costs are rising faster than volume. We believe margin expansion depends on declining commodity costs rather than price hikes. Until then, management will focus on productivity enhancements, cost-savings measures, and price hikes. We reiterate our Hold recommendation on shares of OI. The Glass Containers segment reported an operating profit of $166.2 million in the first quarter of 2006, which was 17.8% lower than the same year ago period. Price increases, productivity, and cost savings failed to offset the rise in energy prices, raw materials costs, and negative currency translation. The Plastics Packaging segment reported an operating profit of $31.7 million in the first quarter of 2006, compared with $30.9 million in the first quarter of 2005. This business is less energy intensive. Consequently, price and productivity more than offset energy inflation--leading to $0.8 million increase in net earnings. We have valued Owens-Illinois on a P/E multiple basis. Currently, the shares trade at 13.7x our 2006 EPS estimate of $1.25--a discount to peers such as Silgan Holdings (Nasdaq:SLGN). Despite the valuation discount, we believe OI has excellent long-term growth prospects due to its strong industry leadership position and willingness to push consolidation. While first quarter results disappointed on debt reduction and volume, we do anticipate a profit rebound in 2006 from continued cost savings, productivity measures, higher pricing and lower commodity costs. However, our valuation multiple remains conservative until European and North America glass container volumes rebound and energy costs subside. Our target price is $18.00, or 14.4x our forward EPS estimate. Avaya Stays a Hold We are maintaining our Hold recommendation for Avaya (NYSE:AV), a leading provider of IP telephony equipment for business and enterprises. Following the release of mixed results for the fiscal second quarter of 2006 (ended March), the company announced further cost reduction initiatives and component supply issues that may impact future sales levels in the near-term. The company also announced its expectations for continued strength in the second-half of the fiscal year, which is a typical seasonality factor. Avaya maintained its market leadership position as large business customers migrate from traditional private branch exchanges (PBX's) to IP-based phone systems. However, the competitive environment is expected to remain challenging with Cisco (Nasdaq:CSCO) and 3COM (Nasdaq:COMS) continuing to address the same customer base. Company shares are trading at 17.9x estimated earnings for fiscal 2006, or approximately 17.2x expected earnings before stock options expenses. This represents a modest premium to the S&P 500, but a discount to the telecom equipment industry. On the basis of enterprise value (EV) to sales, AV is trading at 0.8x estimated 2006 sales, which is below the industry median of 2.2x. Our $12.50 price target is based on an EV/sales (2006) multiple of 1.0x. See the latest posts to the Analyst Blog by visiting http://at.zacks.com/?id=2645 About Zacks Equity Research Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term. Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons. Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=2674. About Zacks Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. 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Zacks Analyst Blog Highlights: Owens-Illinois, Silgan Holdings,
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