Zacks Analyst Blog Highlights: Tower Group, Inc., NuStar Energy L.P., Lockheed Martin Corp., D.R. Horton, Inc. and National Beverage Corp.

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Here are highlights from Monday's Analyst Blog:

Tower Group Outlook Lowers

During the second quarter, Tower Group, Inc. (Nasdaq: TWGP | Quote | Chart | News | PowerRating) announced the acquisitions of Castlepoint Holdings and Hermitage Insurance Group. We expect the transaction to significantly increase the company's capitalization and simplify its current organizational structure. Based on the company's guidance and pending acquisitions, we are adjusting our fiscal 2008 and 2009 EPS targets to $2.95 per share and $3.30 per share, respectively, from $3.00 per share and $3.40 per share, previously.

The shares of Tower Group currently trade at 8.0x our 2008 earnings estimate of $2.95 per share, with a price-to-book of 1.53x to its second-quarter book value of $13.82 per share. Although we believe the company remains well-positioned to continue growing premiums at a rapid clip, we think its aggressive expansion plan in the softening market should in all likelihood experience a worsening within its combined ratios further, modest level of subprime paper in the investment portfolio adds a level of uncertainty over the near term.

NuStar Energy Shining Brightly

NuStar Energy L.P. (NYSE: NS | Quote | Chart | News | PowerRating) is expected to post solid third-quarter results on the back of stronger margins and higher sales volumes from the new asphalt business and increased pipeline throughput. We continue to like the partnership for its diversified asset base and strong distribution-growth prospects. Our new $56 price objective, up from $54 before, reflects a distribution run rate of $4.25 per unit and yield of 7.65%.

The inclusion of the asphalt business in the asset mix further adds to the partnership's diversification and growth prospects. A strong pipeline of organic growth projects and contribution from acquisitions provide the partnership with an above peer-group average distribution coverage ratio. NuStar's current quarterly distribution of $0.985 per unit represents an attractive yield of 8.15%. We estimate that the partnership can sustain distribution-growth in the 8%-9% annual range over the next few years.

LMT an Aggressive Defense Play

Lockheed Martin Corp. (NYSE: LMT | Quote | Chart | News | PowerRating) appears well positioned to continue to benefit from strong defense outlays through 2008-09, debt repayment and an ongoing share repurchase program since October 2002. Solid operating results, higher margins, particularly in the electronic systems segment, via existing and new contracts, both domestic and international, collectively offset lower fighter jet business and continue to deliver strong earnings and cash flow growth.

The management's increased 2008 guidance supports the bullish outlook. Additionally, the company's dividend was recently increased by 20%. Accordingly, we maintain a Buy recommendation on LMT common stock, with a six-month target price of $123.75.

D.R. Horton Stable Thru the Storm

D.R. Horton, Inc. (NYSE: DHI | Quote | Chart | News | PowerRating) reported third quarter loss of $1.26 per diluted share. This is due to weaker gross margins, higher-than-anticipated overhead costs, and larger-than-expected charges for inventory impairments and write-offs of deposits related to land option contracts.

Year-to-date, the company has been successful in generating cash flow, lowering land lots owned and optioned and bringing down the number of homes in inventory. We applaud the management's decision to generate additional cash flow by reducing its FY09 land and land development expenses to $250 million from the $750 million expected in FY08 and the $2.5 billion spent in FY07.

FIZZ Countering Flat Soda Sales

National Beverage Corp.'s (Nasdaq: FIZZ | Quote | Chart | News | PowerRating) management is implementing a 'fantasy of flavors' strategy that emphasizes the expansion of a branded beverage portfolio of proprietary distinctive-flavored soft drinks, energy drinks, juices, and other specialty beverages.

Therefore, the company is less vulnerable to the negative carbonated soft drink trend in the U.S. However, in the near-term, input costs are expected to continue rising due to double-digit increases in the prices of aluminum cans and high fructose corn syrup. The Hold rating is maintained.

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