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Here are highlights from Monday's Analyst Blog:
Nissan Lightening Up
Nissan (Nasdaq: NSANY | Quote | Chart | News | PowerRating) has targeted to make its light commercial vehicle [LCV] business the key driver of growth. The company is focusing on emerging economies both for market expansion and for establishing a source base. Nissan's 5-year plan GT 2012, focuses on quality leadership, zero-emission vehicles leadership, cost leadership, business and market expansion and 5% revenue growth on an average during 2008-2012.
Nissan Motor, in partnership with Dongfeng Motor Co., Ltd. launched the all-new X-TRAIL model in China. X-TRAIL is the fourth passenger vehicle launched in fiscal 2008. The model will be offered in five grades, including two with the gasoline-powered 2.0 liter engine (MR20DE), and three with the gasoline-powered 2.5 liter engine (QR25DE).
Whole Foods Retains Buy Rec
Despite the Whole Foods Market Inc.'s (Nasdaq: WFMI | Quote | Chart | News | PowerRating) ugly 3rd quarter results and equally bad guidance, we are focusing on the company's long-term growth potential and maintaining our Buy rating on Whole Foods. The company is focusing on controlling costs, scaling back new store openings, working to integrate Wild Oats stores into the mix, improving free cash flow, and operating in a weak consumer environment. This focus on operational improvements will be long-term positive for Whole Foods.
Whole Foods is the leader in the natural foods marketplace with 2% of the market. We think the company is well positioned to benefit from the positive, long-term trends in the organic foods sector. Their products appeal to consumers interested in healthy living as well as those who enjoy paying a premium for a superior shopping experience.
Churchill Downs Still a Good Bet
We reiterate our Buy rating on shares of Churchill Downs (Nasdaq: CHDN | Quote | Chart | News | PowerRating) prior to the release of Q3 results. Churchill Downs Incorporated is scheduled to report third-quarter financial results on November 5, 2008, and will hold a conference call to discuss the results the following morning. We will update our outlook and estimates at that time.
We believe that a proper valuation of Churchill Downs' shares should reflect not only the value of the current operations, but also the potential for increased revenue and earnings stemming from additional alternative gaming at the company's properties. Further, the company's low leverage and significant real estate holdings should be taken into account.
Sonic Innovations a Sound Buy
Sonic Innovations, Inc. (Nasdaq: SNCI | Quote | Chart | News | PowerRating) designs, develops, manufactures and markets advanced digital hearing aids, designed to provide the highest levels of satisfaction for hearing-impaired consumers. Capitalizing on its advanced understanding of human hearing, the company has developed patented digital signal processing (DSP) technologies, and embedded them into the smallest single-chip DSP platform ever installed in a hearing aid.
SNCI reported Q3 EPS that beat our estimate by $0.08 on sales that exceeded our forecast. We increased our FY08 sales and EPS estimates. We lowered our FY09 sales estimate but increased our FY09 EPS estimate. The company finally gave up on Tympany and the referral concept and instead has expanded its distribution relationships and is acquiring practices and opening new clinics to help drive meaningful sales growth from new product launches.
General Mills Stable & Modest
General Mills Inc. (NYSE: GIS), headquartered in Minneapolis, Minnesota, is a global consumer food company. Productivity initiatives and new product introductions should help the company achieve high single-digit earnings growth in the long term. Management has also implemented a strategy to enhance shareholder value. However, higher input commodity costs are impeding meaningful margin expansion. The stock is rated a Hold.
During the last four years, a period of relatively stable and modest earnings growth, General Mills' stock has traded in a narrow P/E range of 15 to 19. The stock is currently trading at a P/E multiple of 18.3. Given that the company resumed its share buyback program in fiscal 2006 and is exhibiting modest EPS growth, we expect the stock to trade in the top-end of the historical valuation range; hence, the target price of $70.25 is based on a 19 P/E on trailing 12 month earnings.
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