For Immediate Release
Chicago, IL – November 23, 2012 – Zacks Equity Research highlights PerkinElmer, Inc. (PKI) as the Bull of the Day and Advance Auto Parts (AAP) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on SurModics Inc. (SRDX), 3M Company (MMM) and Johnson & Johnson (JNJ).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
We upgrade our recommendation on PerkinElmer, Inc. (PKI) to Outperform based on its third quarter results. Earnings per share of $0.45 surpassed the Zacks Consensus Estimate by a penny. PerkinElmer is a leader in several life science segments.
It has added new related areas as part of its reorganization and divested unrelated businesses. As a consequence, it has emerged as a higher-growth, higher-margin company. Its operations, both sales and manufacturing, are diversified on a geographic basis. The company has implemented cost containment measures. Growing recurring revenue stream and operating margin expansion are its pillars of strength.
In the end, our Outperform recommendation is supported from a valuation perspective and a favorable risk-reward tradeoff. Based on the company's recent performance, we upgrade our price target to $38.00, which is based on a P/E of approximately 18.4x our 2012 EPS estimate.
Advance Auto Parts (AAP) aims to improve its supply chain and vendor terms by pursuing an aggressive store expansion strategy. However, the sluggish economy, volatile gasoline prices and pricing are some of the challenges facing the company.
The company's profits fell 14.2% to $1.21 per share in the third quarter of the year due to weak sales in the cold weather markets; however, it was in line with the Zacks Consensus Estimate. The company also lowered its earnings outlook for 2012 due to the short-term softness in sales.
Our long-term Underperform recommendation on the stock indicates that it will perform below the broader market. Our $71.00 target price, 13.9X our 2012 EPS estimate, reflects this view.
Latest Posts on the Zacks Analyst Blog:
SurModics Reverts to Neutral
We are reverting to a Neutral recommendation on SurModics Inc. (SRDX) from Outperform as we believe that the stock is fairly valued at current levels. Our target price is $19.00. The stock carries a Zacks #3 Rank (Hold rating) in the short run.
In November 2012, SurModics came out with decent numbers for the fourth quarter of fiscal 2012 (ended September 30, 2012). The company’s fourth quarter fiscal 2012 adjusted earnings of 19 cents per share beat the Zacks Consensus Estimate by 2 cents. Adjusted revenues climbed 12.3% to $13.8 million in the final quarter of fiscal 2012. Strong sales of vitro diagnostics offerings and hydrophilic coatings boosted revenues.
We note that SurModics has taken a number of steps to improve efficiency following its disappointing performance in fiscal 2010. The company trimmed its work-force and made certain changes to its organizational structure to improve efficiencies.
Moreover, following the disappointing performance in fiscal 2010, SurModics revamped its board of directors and also brought about a change at its helm, with the appointment of a new CEO, Gary R. Maharaj. We note that Maharaj is the former President and CEO of Arizant Inc., which was sold to 3M Company (MMM) in October 2010. We are positive on the sale of SurModics’ Pharmaceuticals unit in 2011 as this has allowed the company to focus on its core businesses.
However, since royalties are a major source of revenues at SurModics, any royalty related setback will affect the top line. For example, Johnson & Johnson’s (JNJ) decision to stop manufacturing Cypher and Cypher Select Plus sirolimus-eluting coronary stents, from which SurModics earned royalties, affected SurModics’ top line. Setbacks of a similar nature will negatively impact SurModics’ stock price.
While encouraged by the steps taken by the company to revive itself, we see limited upside potential for the stock from current levels.
Get the full analysis of all these stocks by going to 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.
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