Zacks Analyst Blog Highlights: State Auto Financial Corp., Kirkland's, Inc., ViroPharma, Inc., MetLife Inc. and Akamai Technologies, Inc.

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Here are highlights from Friday's Analyst Blog:

State Auto Ests Bumped Down

State Auto Financial Corp. (Nasdaq: STFC | Quote | Chart | News | PowerRating) reported operating losses of $0.12 per share, versus operating net income of $0.51 per share in the prior year quarter, driven by a record level of catastrophe losses of $76.8 million. The company, however, is progressing on the production front with net written premiums reporting an increase of 12.4% year-over-year.

Standard auto, the largest line of business, is also growing organically with good levels of new business applications and steady retentions. While pricing technology, product development, agency automation and business support have aided the organic growth of the company, growth trends continue to be under attack from intensifying competition, in addition to upward pressure on the company's loss ratios. Therefore, our Hold rating remains in place.

Kirkland's Weathering the Storm

Kirkland's, Inc. (Nasdaq: KIRK | Quote | Chart | News | PowerRating) shares are up 111% year-to-date and have rewarded those buyers who were bottom fishing at much lower levels. We continue to applaud Kirkland's for taking the necessary steps to weather the current storm by focusing on cash flow and closing its unprofitable stores. Moreover, we believe the company's second-quarter results will benefit from higher gross margins and cost controls and are narrowing our quarterly net loss estimate.

However, we are less sanguine about the company's prospects for the second half of the year. Macro headwinds will continue to pressure consumer discretionary spending, and the consumer will not be helped out by those $600 tax rebate checks, as they were in the second quarter. Until we see evidence of the macro conditions improving, we believe it makes sense to take profits in KIRK shares. As such, we are downgrading Kirkland's from a Buy to a Hold.

ViroPharma Cheap and Promising

ViroPharma, Inc. (Nasdaq: VPHM | Quote | Chart | News | PowerRating) made a bold move earlier in July to acquire Lev Pharmaceuticals and with it, Cinryze, a potential $250 million product for hereditary angioedema (HAE). HAE is an ultra-rare genetic disorder and a highly attractive market given the significant unmet medical need.

Thus, we are positive on the deal, but acknowledge that significant questions remain. Nevertheless, the move works to greatly diversify the product portfolio and ease investor concern that a generic Vancocin would be devastating to the financial results.

MetLife with Market Headwinds

MetLife Inc.'s (NYSE: MET | Quote | Chart | News | PowerRating) second quarter operating earnings came in at $1.30 per share, substantially below the estimates, due primarily to a decline in equity markets and higher catastrophe losses in its homeowners business. Net income for the quarter fell 19% year-over-year, due to a spike in investment losses, which overshadowed the 10% growth in the top-line.

After reviewing second quarter results, we have moderated our FY08 and FY09 operating earnings estimates to $5.82 per share and $6.43 per share, respectively. Shares of MetLife currently trade at 1.23 times its 2Q08 reported book value of $41.98 per share, a 2% discount to the peer group median.

Akamai Tech Disappoints in Q2

Akamai Technologies, Inc. (Nasdaq: AKAM | Quote | Chart | News | PowerRating) posted disappointing Q2 results. Slowing growth in media due to the lack of improved broadband deployment, macroeconomic factors, and growing competition in the marketplace have led Akamai to issue disappointing guidance for 2008. The company's 2008 guidance indicates revenue growth of 24.5%, well below historical levels.

We believe that as AKAM serves companies focused on the consumer, it is more sensitive to consumer spending than much of the IT space. Bandwidth deployment is a longer-term concern. With easy deployment of broadband in the form of DSL and cable complete, network providers will need to upgrade existing networks to drive richer media content to households. Although the stock looks cheap on its intra-day price, numbers would need to reaccelerate to drive the stock price.

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