Transcept Pharma (TSPT)
We recently initiated coverage of Transcept Pharmaceuticals (<a href=http://www.zacks.com/stock/quote/tspt>TSPT</a>) with an Outperform rating and $12 price target. We think Intermezzo is a product that can fill a much needed void for insomnia patients with chronic nocturnal awakenings. <p> An FDA decision on the pending new drug application is expected in late October 2009. We think approval is a high likelihood event at that time. <p> With the commercialization partner signed and the financial position solid (estimated $95 million on hand), the stock is significantly under-valued, in our view.Brown & Brown, Inc. Announces the Acquisition of the Group Employee Benefits Division of Roussel & Associates, LLC
DAYTONA BEACH, FL and TAMPA, FL--(Marketwire - August 31, 2009) - C. Roy Bridges, Regional
Executive Vice President of Brown & Brown, Inc. (
Roussel & Associates is an established financial services agency and will continue to offer a range of financial products and services to individuals and businesses in Brentwood, Tennessee and the greater Nashville metropolitan area.
John Murphy: BIG DROP IN CHINESE SHARES CAUSES SELLING IN GLOBAL STOCKS AND COMMODITIES — COPPER AND OIL (AND THEIR RELATED STOCKS) ARE HIT THE HARDEST — SAFE HAVEN MONEY IS MOVING INTO THE YEN AND TREASURIES — OVERBOUGHT STOCKS ARE STARTING TO SLIP — WATCHING THE VIX FOR AN UPSIDE BREAKOUT
I had been surprised at how little attention was being paid to the big drop in Chinese shares since the start of August. That's why I warned on Friday that the big drop in Shanghai could cause...MediaG3 Announces Merger With Cutting Edge Wireless Provider, Imperial Wireless, LLC.
SANTA CLARA, CA--(Marketwire - August 31, 2009) - MediaG3, Inc. (http://www.mediag3.com)
(
Both MediaG3 and Imperial Wireless are very well positioned to benefit from this advantageous opportunity. In the integration of their technologies, products, and services, both companies will provide end-to-end wireless applications to both the American and Asian markets. Imperial Wireless' next generation of WiMax technology, equipment, and services, in combination with MediaG3's LMDS platform, will provide the post-merger Company with significant competitive advantages as it executes its expansion plans in rural and metropolitan areas in the United States and international
Fired up over coal ETF
"Coal accounts for more than 70% of China's electricity," says Tony Sagami. In Uncommon Wisdom, he looks to an ETF poised to benefit from long-term rising coal demand.
"China's coal consumption is growing, and it is building coal-powered power plants at a breakneck pace.
"Why? Because they are much cheaper to build and operate than any other power-producing option. China is power starved, and coal is the main resource used for generating electricity in the country.
"China alone uses more coal than the United States, Japan and Europe combined. China is also the world's top producer of steel, a big burner of coal. More coal-fired power plants are on the way.
"Let this statistic sink into your brain — China is activating one new coal-fired plant every week of the year. The reason for the high demand is simple: Per unit of energy delivered, coal costs about one-fifth as much as oil.
"The second-thirstiest consumer of coal is the steel industry. Steel production uses a different type of coal though. Low-carbon, low-quality coal is used for electricity generation, but the high-carbon, high-quality coal is used to produce steel.
"Between coal-fired power plants and steel production, the demand for coal is going to be steady and reliable for decades to come. My point is pretty simple and one that I've repeated many times: you have to get long whatever China is buying.
"If you're more of an ETF investor, take a look at Market Vectors Coal ETF (NYSE: KOL). Its top holdings include Bucyrus Int'l, China Coal Energy, Joy Global, Massey Energy, Peabody Energy and Yanzhou Coal. Overall, coal may be dirty but it could also be a gold mine."
Two ways to ride the rails
"We rate both Burlington Northern Santa Fe (NYSE: BNI) and Canadian National Railway (NYSE: CNI) as buys," says analyst Tom Slee.
The contributing editor to Gordon Pape's Internet Wealth Builder suggetss, "Burlington Northern remains my number one pick in the sector but CN is excellent value at these levels." Here's his bullish review.
"Burlington Northern Santa Fe had a relatively good second quarter, posting earnings of $1.18 a share. This is down from $1.34 in 2008 but beat the consensus estimate of $1.01.
"Year-over-year revenues fell 26% although this was offset by a 33% reduction in costs as a result of tighter controls and lower energy prices.
"The outlook for U.S. railways remains clouded, primarily because the American economy continues to sputter. On the other hand, volumes have stabilized in recent weeks and should improve during the second half as we move into the harvest and winter heating seasons.
"Further out, industry analysts are forecasting an almost 4% increase in car loadings next year and that is going to give lift BNI's earnings. This is now a much leaner company.
"We always knew that Burlington, along with all the other railroads, would be hurt by the economic collapse and we are now seeing the damage in the numbers.
"The good thing, though, is that the company remains profitable and is expected to earn about $5.25 a share this year followed by $6.75 or more in 2010.
"Operating margins remain respectable and should improve rapidly as volumes increase and there is better asset utilization. I continue to like BNI because of its long-haul markets, tight management, and a healthy cash flow that amounted to $888 million in the second quarter.
"Also, according to Union Pacific CEO Jim Young, the railways have not yet felt a boost from federal stimulus packages. This should give Burlington a lift.
"Perhaps most important, the stock has been a laggard during the recent market recovery. It now has a lot of upside potential. Our upside target is $93.
"Canadian National is a barometer of the Canadian economy. You could say that it has its finger on the country's pulse. There does seem to be some light at the end of the tunnel.
"Rising shipments in basic resources, chemicals, and particularly consumer goods bode well for a whole array of companies and business generally.
"As far as CNR itself is concerned, the company has performed well during the downturn, reporting respectable earnings mainly by trimming overheads.
"In addition, management has been quietly improving its operating structure. For instance, profitability in the railway business is to a large extent a function of length of haul.
"The further freight moves, the more money the carrier makes. So CN has been dramatically increasing its average length of haul and at the same time eliminating short-haul traffic.
"As a result, while the company's car loadings are down 24% this year, revenue ton miles are off only 14%. This sort of streamlining is going to boost earnings as we move into the recovery.
"Moreover, CEO Hunter Harrison reported that there has been a sharp improvement in business since May. He looks forward to a much better second half.
"Barring a second North American economic collapse, CN Rail should make about $3.40 a share this year, followed by as much as $4 or more in 2010.
"As a result, I expect the stock to move up over the next few months to reflect this growth, especially if we see a good third quarter. CN Railway is a buy with a target of $62."
Sunoco (SUN)
Our Underperform recommendation on Sunoco (<a href=http://www.zacks.com/stock/quote/Sun>SUN</a>) shares takes into account the bearish refining margin outlook. A growing supply overhang in the face of a recession-induced fall in global oil product demand has led to a squeeze in refiners profits. <p> Sunoco's lack of geographic diversification and refining flexibility has also become a major liability, in our view. Weighed down by these factors, the company posted a second-quarter 2009 loss. <p> Overall, we see a fairly unfavorable macro backdrop for independent refiners like Sunoco. We believe this will cause Sunoco shares to underperform relative to the market as well as the sector in the coming quarters.Yum! Brands (YUM)
The operator of Taco Bell, Pizza Hut, and KFC fast food chains, Yum! Brands (<a href=http://www.zacks.com/stock/quote/yum>YUM</a>), reported second quarter results, with double-digit growth in the bottom-line. Earnings per share grew 11% to 50 cents, surpassing the Zacks Consensus Estimate of 43 cents. <p> Driving growth is the company's overseas divisions (China and Yum Restaurants International), which constitute the only stable segment of the entire restaurant industry. Both the divisions are on track to grow operating earnings by an average CAGR of 20% and 10%, respectively. <p> The U.S. operations are also showing signs of revival with an expected operating earnings growth of 5%. We think the stock provides relative safety and moderate growth in a turbulent environment and exposure to faster-growing international markets. <p> As a result, the company remains confident of its business model and its ability to deliver at least 10% EPS growth in 2009 and beyond consistently. As such, we maintain an Outperform recommendation on the stock.John Murphy: TREASURY RALLY HINTS AT STOCK PULLBACK — SO DOES 20% AUGUST DROP IN SHANGHAI INDEX — GOLD IS CONSOLIDATING IN BULLISH SYMMETRICAL PATTERN — GOLD SHARES ALSO LOOK PROMISING
Last week (August 18) I wrote about one of the side-effects of a deflationary environment being the positive correlation between stock prices and Treasury bond yields. In other words, Treasury...Charged up over MasterCard (MA)
"In this recession, consumers are spending less per purchase on their credit cards -- but that hasn't slowed down the credit card company MasterCard (NYSE: MA)," says Paul Tracy.
In his The StreetAuthority Market Advisor, he points out, "In the second quarter, MasterCard's net income grew by +26%, beating Wall Street's expectations by a significant margin." Here's his review.
"MasterCard makes its money from the fees it charges merchants and the banks that issue its cards. The issuing banks make money by charging consumers interest.
"And as we've seen, the banks can lose money when consumers default on their credit card debt. But MasterCard's fee-based business model has been relatively resilient during the downturn.
"People are still using their credit cards. In fact MasterCard reported credit card transactions were up +7.9% in the second quarter.
"And although the dollar value of the transactions was lower by -9.3%, much of the decline was offset by the higher transaction fees MA in instituted back in April.
"MasterCard's net revenues were up just +2.7%. But by cutting administrative and marketing costs by -23.4%, the company not only increased profits but grew its operating margin from 33.4% to 43.5%, excluding one time charges.
"In its recent earnings announcement, the company said it would be difficult to meet a previously set revenue growth target of between +12% and +15% for the 2009-2011 period. But after seeing MasterCard's ability to control costs, my staff and I are less concerned about slower revenue growth.
"And brighter days may already to be at hand. The company noted that cross-border transactions seem to be stabilizing going into the third quarter. While this might be anecdotal, MasterCard's observation coincided with reports that GDP is rebounding in larger European countries like Germany and France.
"MasterCard skillfully navigated the worst of the global recession and appears to be sailing in smoother seas. While consumers may keep their spending in check for the foreseeable future, MasterCard's higher fee structure should mitigate any continued weakness. We believe MasterCard is a solid buy under $225 per share."