Zacks Bull and Bear of the Day Highlights: Smith International, Sanmina-SCI, Group 1 Auto, Avanex Corp. and Cummins, Inc.

Full analysis of all these stocks is available at http://at.zacks.com/?id=2676.

Here is a synopsis of all five stocks:

Bull of the Day: Smith International (NYSE: SII)

We are upgrading Smith International shares to Buy from Hold following the stock's recent weakness, which has made valuation very compelling, in our view. The recent completion of the W-H Energy acquisition provides Smith with entry into new product lines with favorable growth prospects, particularly internationally.

Looking ahead, we expect the company to generate strong revenue growth and margin expansion, aided by demand acceleration, price increases, and cost discipline. We have raised our EPS estimates (2008: $3.87 vs. $3.78; 2009: $4.90 vs. $4.69) and kept our price objective unchanged.

While near-term commodity-price weakness may weigh on the stock price, the company's long-term prospects remain positive, given its growing Eastern Hemisphere revenue mix, which have historically tended to be less volatile than those generated in the North American land-based market.

Bear of the Day: Sanmina-SCI (Nasdaq: SANM)

Although Sanmina has shown some growth in its core EMS segment and has a reduced cost structure, the company is currently struggling with industry-wide weakness. After exiting its PC business, Sanmina will focus on its core business and margin improvement.

The company posted a better than expected Q3. However, we would like to see sustained growth before becoming more positive. Although the sale of its PC business will help Sanmina as it eliminates a slowing business, we believe it is still too early to get involved in SANM stock until we get a clear outlook on how the remaining business performs on a stand-alone basis.

Given the weak economic environment, we maintain a Sell recommendation on SANM shares. We believe that the outlook for the industry is poor as core sectors continue to face sluggish demand coupled with fewer acquisitions. Our six-month price target remains at $1.00.

Latest Posts on the Zacks Analyst Blog:

Group 1 Automotive (NYSE: GPI)

Group 1 Automotive, Inc. has generated most of its recent growth through acquisitions. The recently reduced interest rates will provide further growth to the company. Group 1 manages its costs aggressively and has dealerships with above-average profitability.

Further, the company has strong geographical presence. However, a difficult car sales environment is affecting revenues. The company anticipates a modest 1-2% growth in revenues for 2008. Thus, we rate the stock a Hold with a target of $23.

Avanex Corp. (Nasdaq: AVNX)

Avanex expects to report revenues for Q1:FY09 (ending September) between $44 million and $48 million, while gross margin is anticipated to around 20%-23%. Management cited a slowdown in China and pricing pressure for the expected sequential decline in revenues.

It is highly unlikely that the company will be profitable in fiscal 2009. Earlier in July, the company saw the departure of its CEO and the resignation of its CFO.

We maintain a Hold rating for long-term, risk-oriented investors with prior exposure to the speculative nature of the stocks in the communication equipment and component space. Our caution is mainly with respect to the consolidation in the optical component industry overall and the execution risks associated with implementing Avanex's strategy.

Cummins, Inc. (NYSE: CMI)

Cummins is set to benefit from fuel economy improvement, new emission trends, market share gains, growing international markets and increased prices. The company's financials are also rapidly improving. Cummins expects high gas prices and environmental concerns to increase demand in the U.S. for light-duty diesel engines, which are about 30% more fuel efficient than gasoline engines.

Management anticipates a 15% rise in sales for the full year 2008, up from the previous guidance of 12%. It expects to earn an EBIT margin of 10%. However, the slumping U.S. economy and a softening heavy-duty truck market, which forms over 50% of the company's business, raise concerns. As a result, we rate the shares a Hold with a target of $70.

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=2649.

About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About the Analyst Blog

Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=2677.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=4582.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

SOURCE: Zacks.com

Zacks.com Mark Vickery 312-265-9380 Visit: www.zacks.com