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: Bayer AG (OTC: BAYRY), Soapstone Networks, Inc. (Nasdaq: SOAP), Harmony Gold Mining Co. Ltd. (NYSE: HMY), PetroChina Co. Ltd. (NYSE: PTR) and Entercom Communications Corp. (NYSE: ETM).
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Here are highlights from Monday’s Analyst Blog:
Bayer Risk, Reward Balanced
Bayer AG (OTC: BAYRY) has been shifting its focus on the healthcare segment in the past few years in order to maintain solid growth in the long run. The acquisition of Schering AG should improve its product portfolio, and we expect higher-cost synergies from the acquisition. The company reported 2Q08 financial results which were in line with our expectations. We maintain our Hold rating.
Bayer’s future growth should be mainly driven by its healthcare segment. However, we are concerned about the slowdown in this segment, especially in the fourth quarter of 2007 and in the first quarter of 2008. Sales in the healthcare segment only grew by 0.9% in 4Q07 and 3.4% in 1Q08.
Soapstone Keeps from Slipping
We maintain our Hold recommendation on the shares of Soapstone Networks, Inc. (Nasdaq: SOAP). The company’s shares continue to drift down with a lack of news regarding customers for its PNC (Provider Network Controller) product.
Soapstone is primarily focused on developing and marketing its Soapstone PNC framework. The company has made several announcements regarding new products, including successful interoperability testing of the IPsphere Forum Service Structuring Stratum. However, it currently appears that PBT, which was expected to be the key driver for PNC, is having a difficult time catching on with tier 1 carriers.
Harmony Gold Cutting Costs
Harmony Gold Mining Co. Ltd. (NYSE: HMY) is benefiting from higher gold prices. Going forward, Harmony is focused on reducing its overall operating costs through its continuous operations agreement or CONOPS and the shutdown of loss-making shafts. The company is also reducing its headcount to control costs. As a result, we rate the shares a Hold with a target of $9.50.
However, CONOPS was terminated at Elandsrand, Evander 2 and 5, Cooke 1, 2, and 3 shafts, Masimong and Tshepong mines during fiscal 2008. We expect these measures to assist in improving the company’s profitability. Fiscal 2008 cash operating costs were up 10.8% year-over-year due to lower production and inflationary pressures on salaries, electricity and steel and fuel.
PetroChina at a High Premium
There has been some weakness in PetroChina Co. Ltd. (NYSE: PTR) ADRs due to the pullback in crude oil prices, but they are hardly cheap. Based on most conventional valuation metrics, they trade either in line or at a premium to their Chinese and emerging market peers.
Relative to the super majors, the ADRs trade at a significant premium, primarily reflecting the company’s leverage to the high-growth Chinese market. But fuel price caps and heavy taxes offset most, if not all, of the Chinese market positives, in our view. As such, we consider current valuation to be fair and prefer staying on the sidelines for now.
Entercom May Be Worth Entering
Entercom Communications Corp. (NYSE: ETM) is in the midst of both a cyclical slowdown, pressured by a weak economy, and a secular downturn, which has slowed industry growth to just 2 percent annually on an average over the last five years.
The industry has seen an uninterrupted decline for several years, and does not look likely to improve in the near-term. Best-of-breed, however, the company’s same station revenue is decelerating more slowly than its peers, and we think it is in a position to outperform the industry when the cycle turns up.
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