WiMAX World 2008: Zacks Analyst Blog Highlights: GlaxoSmithKline Plc., Metabasis Therapeutics, Inc., Central Garden & Pet Co., AFLAC Inc. and Crown Castle International Corp.
Posted on October 2, 2008
Filed Under TechShowWIRE
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: GlaxoSmithKline Plc. (NYSE: GSK), Metabasis Therapeutics, Inc. (Nasdaq: MBRX), Central Garden & Pet Co. (Nasdaq: CENT), AFLAC Inc. (NYSE: AFL) and Crown Castle International Corp. (NYSE: CCI).
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Here are highlights from Tuesday’s Analyst Blog:
Glaxo Price Considers Avandia
GlaxoSmithKline (NYSE: GSK) is the world’s second largest pharmaceutical company, with global operations based in the U.K. and the U.S. Although Glaxo has made significant progress with its late-stage pipeline, we are worried about the recent negative news surrounding the company’s second-largest-selling drug, Avandia, as well as generic competition to several other products.
Given the issues regarding Avandia and significant sales erosion of other products from generic competition, we expect 2008 sales to come in only about 2% higher than 2007. The company’s efficiency initiative should keep SG&A expenses in check. We think Glaxo possesses one of the stronger late-stage pipelines in large-cap pharma but believe the shares will remain constrained until there’s more visibility on the Avandia issue. Our price target is $47.
Metabasis Comeback Too Early
Metabasis Therapeutics, Inc. (Nasdaq: MBRX) is a biopharmaceutical company that engages in the discovery and development of drugs for chronic diseases involving pathways in the liver. In July 2007, the company suffered two major setbacks when its lead drug, CS-917, failed to meet the primary endpoint in a phase IIb trial, and Schering-Plough terminated its agreement for the development of pradefovir. Both products were in mid- to late-stage trials.
The shares plummeted 54% in response to the news and the company has yet to recover from these setbacks. Although Metabasis reported positive results on core pipeline candidates, MB07803 and MB07811, we believe that investor confidence is not likely to return until the company enters into suitable partnership deals for its candidates. We maintain our Hold rating on the stock with a price target of $1.50.
Central Garden & Pet Costs Up
Central Garden & Pet Company (Nasdaq: CENT) produces, innovates, and markets pet, lawn, and garden products under leading brands. In fiscal 2007, the company generated 53% of net sales and 95% of operating income from the Pet Products segment, which markets Four Paws, TFH, Nylabone, and Interpet pet supplies; Wellmark insect control products; and Kaytee bird and small animal food. The company also markets Oceanic and All-Glass Aquariums, and Kent Marine saltwater aquarium supplies.
Management is addressing a difficult environment of adverse weather and higher costs, which have affected sales and profitability. The benefits from the strategy of expanding the operating margin through a positive mix shift towards higher margin products and the optimization of the supply chain has been delayed.
AFLAC Steadies with Japan
AFLAC Incorporated (NYSE: AFL) is a leading underwriter of supplemental medical insurance products in the United States and Japan. In the U.S., the company markets and administers its products primarily through its subsidiary, American Family Life Assurance Company of Columbus, and holds the leading share of supplemental health policies sold at the policyholders worksites.
After reviewing 2Q08 results, we are maintaining our FY08 and FY09 estimates and our Hold rating on the shares of AFL, with a six-month target price of $62.00 per share. The shares are currently trading at a price-to-book multiple of 3.60x, a 77% premium to the peer group median of 2.04x.
Crown Castle Remains a Buy
We maintain our Buy rating, but reduce the valuation target for Crown Castle (NYSE: CCI), a leading operator of wireless communications towers in the USA and Australia. We believe recent weakness in the stock price is related to general global equity market conditions and not necessarily impacted by any changes to company’s financial fundamentals.
Overall performance is expected to be driven by substantial demand for more tower space to facilitate high-speed data services — in particular, 3G mobile technologies, mobile video and new WiMAX deployments. The merger with Global Signal has provided better-than-expected cost synergies.
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