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The Zacks Analyst Blog Highlights: Delta Air Lines, United Continental Holdings, Southwest Airlines, AstraZeneca and Forest Laboratories

For Immediate Release

Chicago, IL – June 28, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Delta Air Lines Inc. (DAL), United Continental Holdings Inc. (UAL), Southwest Airlines Co. (LUV), AstraZeneca (AZN) and Forest Laboratories (FRX).

 

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Here are highlights from Wednesday’s Analyst Blog:

 

Delta Foresees Robust 2Q

 

The second largest U.S. airline, Delta Air Lines Inc. (DAL), expects second quarter unit revenue (or revenue per available seat miles) to grow 8% year over year thanks to the growing business travel demand and flight expansion in the New York market. The addition of novel features to its services as well as introduction of new products is also expected to boost revenue.

Due to the drop in fuel prices, the company foresees $155 million loss from fuel hedging strategies in the second quarter. Delta Air Lines was 70% hedged for the second quarter at a jet fuel price of $3.05–$3.40 per gallon using collars and call spreads. As a result, the company expects to record operating loss in the quarter with negative 1% margin after accounting for the hedges and other special charges.

However, on a non-GAAP basis, the company still expects operating margin in the range of 8–10% and consolidated unit cost, excluding fuel, to grow 3-4% year over year. Additionally, the company expects both domestic and international flying to decline 1–2% year over year.

Now, the company estimates fuel price of $3.37 per gallon for the ongoing quarter, up from the previous forecast of $3.28 per gallon attributable to hedge losses that were settled in May and June.

For the second quarter, the Zacks Consensus Estimate for Delta remains unchanged at 80 cents over the last 7 days but fell by a penny in the last 30 days. The estimate represents a massive growth of 84.88% from the year-ago quarter.

 

Further, Delta Air Lines, which competes strongly with United Continental Holdings Inc. (UAL) and Southwest Airlines Co. (LUV), continues to have a healthy balance sheet. The company expects to exit the quarter with $5.3 billion in unrestricted liquidity including $3.5 billion in cash and short-term investments, and $1.8 billion in undrawn revolving credit facilities.

We are currently maintaining our long-term Neutral recommendation on Delta Air Lines. For the short term, the stock retains a Zacks #3 (Hold) Rank.

 

 

Good News for AstraZeneca

 

Good news flowed in at AstraZeneca (AZN) from Europe when the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (:EMA) recommended the approval of AstraZeneca’s Zinforo (ceftaroline fosamil) in the EU.

The CHMP recommended the approval of Zinforo for treating adults with complicated skin and soft tissue infections (cSSTI) or community acquired pneumonia (CAP). A final decision from the European Commission (EC) is expected in the coming months.

The positive opinion on Zinforo was based on positive data from four phase III trials - CANVAS 1 and 2 (cSSTI) and FOCUS 1 and 2 (CAP). AstraZeneca has submitted marketing applications in several countries and is planning further submissions this year for Zinforo.

We note that in 2009, Forest Laboratories (FRX) out-licensed co-exclusive development and exclusive commercial rights to Zinforo in all territories except the US, Canada and Japan. In March 2011, Forest launched its version of ceftaroline fosamil under the trade name Teflaro in the US. The company reported Teflaro sales of $22.4 million for the 12 months ending March 31, 2012.

Neutral on AstraZeneca

We are encouraged by AstraZeneca’s focus on high-potential emerging markets and are pleased with its effort to drive the bottom line through cost-cutting initiatives and share buybacks.

However, we remain concerned about the generic competition faced by the company’s key products. In 2011, the company lost revenues worth almost $2 billion to generic competition. The weak late-stage pipeline coupled with the slow Brilinta uptake also bothers us. We currently have a Neutral recommendation on AstraZeneca. The stock carries a Zacks #3 Rank (Hold rating) in the short run.

 

 

 

 

 

 

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Read the analyst report on DAL

Read the analyst report on UAL

Read the analyst report on LUV

Read the analyst report on AZN

Read the analyst report on FRX

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