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: Kellogg Co. (NYSE: K), Hewitt Associates, Inc. (NYSE: HEW), Carnival Corp. (NYSE: CCL), Carnival Plc. (NYSE: CUK) and Royal Caribbean Cruises Ltd. (NYSE: RCL).
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Here are highlights from Monday’s Analyst Blog:
Kellogg Not Flaking Out
Kellogg Company (NYSE: K), the leader in ready-to-eat cereals, has successfully executed the Volume to Value and Manage for Cash strategies. In 2006, management adopted additional programs, namely, "Sustainable Growth" and "People Passion and Pride."
The Hold rating is maintained. During the last five years, a period of relatively stable and modest earnings growth, Kellogg's stock has traded in a narrow P/E range of 16.6 to 21.7. The stock is currently trading at a P/E multiple of 18.2. Given that cash flow has been increasing consistently and EPS have exhibited modest growth, the stock is expected to trade at the top-end of the historical valuation range. Hence, the target price is $60.75 based on a 21.5 P/E multiple on trailing 12-month earnings.
Hewitt Associates Feels Downturn
Suburban Chicago-based Hewitt Associates (NYSE: HEW) is one of the leading providers of human resources outsourcing and consulting services in the world. With more than 60 years of experience in human resources, Hewitt now provides human resources services in 33 countries.
While Hewitt is the clear leader in the emerging human resources BPO (business process outsourcing) market, the target price is $40.25, which is a 20 P/E multiple on trailing 12-month EPS. Given the minimal expected price appreciation, the stock is rated a Sell.
Carnival's Modest Surprise
We maintain our Hold rating for Carnival Corporation (NYSE: CCL) and Carnival Plc (NYSE: CUK) following the release of Q3 financial results. We expect Carnival to continue to trade at a premium to its largest competitor over the near-term. As a single economic entity, Carnival Corporation & Carnival Plc is the largest cruise operator in the world.
Carnival has historically traded at a premium to Royal Caribbean (NYSE: RCL), based on forward price-to-earnings multiples. This relationship still holds, based on current prices and our forward twelve-month EPS estimates for both companies. While Carnival Corporation is trading at 14.0x estimated 2008 earnings, Royal Caribbean is currently trading at 9.8x estimated 2008 EPS. We expect Carnival to continue to trade at a premium over the near-term. Our six-month target price of $42.00 is based on a multiple of 15x expected 2008 earnings.
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