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Here are highlights from Monday's Analyst Blog:
Northrop Grumman a "Defensive" Play
Northrop Grumman (NYSE: NOC | Quote | Chart | News | PowerRating) offers a strong program portfolio positioned to take advantage of growth areas in the defense budget, an improving balance sheet and an ongoing share repurchase program. Favorable projected revenue, the acquisition of 3001 International, favorable ruling regarding the BAMS contract [a deal offered NOC by the U.S. Navy, validated by the Government Accounting Office, or GAO], diversified revenue and earnings streams with strong growth and discounted relative valuation metrics collectively support our bullish outlook for NOC.
Accordingly, we maintain our BUY recommendation on NOC common stock with a six-month target price of $54.75. Price appreciation to our near-term valuation target coupled with the $0.40 per share quarterly dividend which we deem secure and sustainable based upon low projected payouts, represents 24.1% upside potential.
Kinder Morgan Upgraded to Buy
We have upgraded Kinder Morgan (NYSE: KMP), the largest independent owner and operator of petroleum product pipelines in the U.S., to Buy from Hold on valuation grounds.
We believe that the recent broad MLP-group sell-off in general and KMP weakness in particular is overdone and provides for excellent buying opportunities. Distributions are safe as evident from KMP's just-announced distribution increase.
EXBD a Sell Prior to Earnings
The Corporate Executive Board Company (NASDAQ: EXBD | Quote | Chart | News | PowerRating) provides research and analysis to more than 4,700 corporations for a fixed annual membership fee. The company targets top-level executives across a multitude of industries, and then identifies the common issues facing those individuals in a given year.
We maintain our Sell rating on shares of EXBD prior to the release of third-quarter results. We slightly reduced our full-year estimate following the release of Q2 results, as the company's outlook remains modest, in part due to the fact that EXBD has yet to improve its cross-sell ratio.
Maxim Integrated a Buy Up to $20
Maxim (NASDAQ: MXIM | Quote | Chart | News | PowerRating) is an OEM [original equipment manufacturer] of semiconductor analog and mixed signal ICs [integrated chips]. Management's preannouncement for Q1 is a 2-8% decline in revenue. The restatement was completed, with a total after-tax impact of -$542.1 million on profit.
Management has announced a significant reduction in the capex for 2009, in response to the broad macro-weakness. We are reiterating our Buy rating on MXIM shares, given the diversity in the company's markets, healthy product pipeline and strong cash generating capabilities.
Nucor (NUE) a Hold as Steel Cools
Charlotte-based Nucor (NYSE: NUE | Quote | Chart | News | PowerRating) is the largest in the U.S. for the production of structural steel, steel bars, steel joists, steel deck and cold finished bars.
On October 16, Nucor reported third quarter 2008 results. In the reported quarter, diluted earnings per share were $2.31, an increase from $1.29 in the same quarter of the previous year. Nucor's consolidated net sales increased 75% to $7.45 billion, compared with $4.26 billion in the third quarter of 2007. Average sales price per ton increased 51% from the third quarter of 2007.
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