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Here are highlights from Friday's Analyst Blog:
Patni Reliant on U.S. Market
Patni Computer Systems, Ltd. (NYSE: PTI | Quote | Chart | News | PowerRating) reported in-line revenues and earnings in the second quarter of 2008, aided by higher other income. The company also benefited from a lower-than-expected effective tax rate in the quarter.
Partnership with Trillium Software and appointment of a Senior Vice President of Manufacturing Services will serve the company well in times of a possible slowdown of the U.S. economy, India's biggest software exports destination. Also, introduction of Enablement Services to help independent software vendors make the transition to an Oracle-based 'Software as a Service' platform will help generate additional revenues.
Incyte Biotech a Near-Term Hold
The discontinuation of dexelvucitabine, the most advanced candidate for HIV/AIDS was a big setback for Incyte Corp. (Nasdaq: INCY). However, we are pleased to see the progress in the company's other product candidates. In our opinion, these are valuable assets, which have the potential to drive growth forward at Incyte.
The company received a major boost recently with the announcement of a collaboration agreement with Pfizer (NYSE: PFE | Quote | Chart | News | PowerRating) on CCR2 antagonist program. We view this collaboration as a major positive for Incyte. Positive clinical development could validate the company's research approach and drive the shares higher thanks to Pfizer's marketing muscle.
ICICI Bank at Fair Value
We are maintaining our Hold recommendation on ICICI Bank Limited (NYSE: IBN). The company reported 2009 fiscal first quarter (June 30) earnings down 6% year over year to Rs7.28 billion, below our estimate as noninterest income growth slumped 21%.
This reflected the negative impact of Rs 5,940 million on IBN's securities and trading portfolios due to a sharp increase in interest rates and adverse market conditions. We are cutting our fiscal year (March 31) EPADS estimates to $2.00 from $2.20 for 2009. Our initial 2010 estimate is $2.45. Results should benefit from solid loan growth on strong economic gains in India, partially offset by rising provisions.
Tractor Supply -- Take Profits
We are downgrading Tractor Supply Co.'s (Nasdaq: TSCO | Quote | Chart | News | PowerRating) shares from a Buy to a Hold. The shares are up 40% in just over two weeks, and we think it makes sense to take profits right here. The shares look fairly valued at 15.5x our 2008 EPS estimate and 14.0x our 2009 EPS estimate. Our target goes from $39 to $40, which is 14x our 2009 EPS estimate.
On July 23, the company reported better-than-expected results for the second quarter, beating the consensus estimate by $0.05. The management reiterated its sales and EPS guidance for full-year 2008. Despite the difficult macro conditions, including higher food and energy prices and weak consumer confidence, Tractor Supply's focus on sales growth and cost controls is enabling the company to deliver solid results.
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