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Here are highlights from Monday's Analyst Blog:
Visteon Looks to Asian Growth
On July 30, Visteon Corp. (NYSE: VC | Quote | Chart | News | PowerRating) reported a loss per share of $0.32 in the second quarter from continuing operations, compared to the loss per share of $0.46 in the same quarter of the previous year.
The company is focusing on strengthening its non-Ford businesses and reducing costs in order to attain long-term profitability. The closure of underperforming facilities and the reduction of headcount under the three-year improvement plan are benefiting the company. Both restructuring facilities and overhead reductions would result in cumulative savings of $635 million by the end of 2010.
Sanofi Warrants Current Valuation
We expect Sanofi-Aventis (NYSE: SNY | Quote | Chart | News | PowerRating) to earn pro-forma adjusted EPS of $4.25 in 2008. This is growth of approximately 4% over 2007 at constant exchange rates. We believe the company's top-line will contract by just over 1% relative to 2007 as a result of intense generic competition. Continued significant sales growth from blood-thinning drug Plavix, insulin drug Lantus and the vaccine business will be offset by lost market share and softer pricing due to generic products.
Bottom-line growth will come from a reduction in selling, general and administrative expenses, continued strong contribution from Plavix U.S. sales and share repurchases. Based on a current price of approximately $34.96 per share, Sanofi-Aventis currently trades at a P/E ratio of 8.2x 2008 EPS. We calculate the peer group average is approximately 13.6x 2008 EPS with roughly 8% estimated four-year growth, compared to Sanofi's expected EPS growth rate of 6%.
Big 5 Limited Near-Term Upside
The investment case for Big 5 Sporting Goods (Nasdaq: BGFV | Quote | Chart | News | PowerRating) comes from its business model, store expansion plans and promotional strategy to counter the low demand of seasonal products. The company strives to offer value to consumers by offering a distinctive merchandise mix that includes a combination of well-known brand names, merchandise exclusive to BGFV under a manufacturer's brand name, and private-label merchandise.
Nevertheless, these positive factors are offset by the difficult macroeconomic environment, geographical concentration of BGFV's stores, and seasonal earnings stream. The company lowered its guidance from $0.60-$0.85 to $0.60-$0.80 for 2008. Given the weak sales trends at its stores, it will be difficult for BGFV to meet its full-year guidance.
TC Pipelines Flowing Strong
TC PipeLines, L.P.'s (Nasdaq: TCLP | Quote | Chart | News | PowerRating) second-quarter earnings, while on the lower side relative to our estimates, were above year-earlier levels. The year-over-year increase resulted from higher transmission revenue, lower financial charges and increased equity income from Great Lakes, partially offset by a fall in equity income from Northern Border.
Importantly, TCLP raised its quarterly distribution by 7.6% year-over-year to the annualized rate of $2.82 per unit. We continue to like the partnership for the potential addition of quality assets to the partnership's portfolio over the next few quarters from its general partner. Our Buy recommendation and price objective remains unchanged.
Navigant in Very Choppy Waters
Navigant Consulting (NYSE: NCI | Quote | Chart | News | PowerRating) reported solid financial results in the first quarter, with impressive utilization rates and strength in several segments. Second-quarter results, however, showed signs of weakness.
Although management moderately increased its full-year revenue and EBITDA guidance, the magnitude of the increase was less than the expected contribution from the recently acquired Chicago Partners. As such, management effectively lowered its guidance for operations in the core business. Utilization rates also declined sequentially during the second quarter.
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