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The Zacks Analyst Blog Highlights: Krispy Kreme Doughnuts, AstraZeneca, BG Group, Jazz Pharmaceuticals and Santarus

Zacks Equity Research


For Immediate Release

Chicago, IL – July 17, 2013 – 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 Krispy Kreme Doughnuts Inc. (KKD-Free Report), AstraZeneca (AZN-Free Report), BG Group (BRGYY-Free Report), Jazz Pharmaceuticals (JAZZ-Free Report) and Santarus, Inc. (SNTS-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Tuesday’s Analyst Blog:

Krispy Kreme Approves Buyback

Krispy Kreme Doughnuts Inc. (KKD-Free Report) recently approved a new stock repurchase program, thereby maintaining the trend of returning wealth to its shareholders from time to time, depending on market conditions. Under this program, the company is authorized to repurchase up to $50.0 million of its common stock with immediate effect. As of Jul 12, 2013, Krispy Kreme had approximately 66 million shares outstanding.

The share buyback program helps the company reduce outstanding share count, thereby increasing earnings per share and return on equity. Apart from bolstering shareholder value, this strategic move will also lift the relatively undervalued share price.

The announcement pushed up the doughnut maker’s stock during the trading session on Jul 15 as it touched a new 52-week high of $20.60 and eventually closed at $20.19.

This Winston-Salem, NC-based company completed a $20 million share repurchase program last year. Hence, another authorization of $50 million reflects the company’s confidence in its fundamentals.

Krispy Kreme boasts a sound financial position. As of Jul 12, 2013, the company's cash balance was nearly $55 million and unused borrowing capacity on its revolving credit facility was approximately $31 million.

Krispy Kreme is gradually moving in a positive direction. Persistently solid earnings, comps improvement, various strategic alliances, expansion of its franchising business, and effective utilization of cash provided the company a shot in the arm.

Further, the solid first-quarter 2014 results and management’s increasing faith in the company’s prospects led it to raise fiscal 2014 earnings per share guidance from the range of 53-57 cents to the range of 59-63 cents. This revised range implies a year-over-year increase of around 26%–34%.

We believe, despite hitting its 52-week high, this Zacks Rank #2 (Buy) stock has plenty of upside left, given its raised fiscal outlook and expected long-term earnings growth of 25%.

AstraZeneca CFO to Leave

AstraZeneca (AZN-Free Report) recently announced that its Chief Financial Officer (:CFO) and Executive Director, Simon Lowth, will leave the company at the end of Oct 2013. Lowth will be joining BG Group (BRGYY-Free Report) as CFO in November.

We remind investors that this is the second major change in AstraZeneca’s management in the last few quarters. In Aug 2012, Pascal Soriot was recruited as the Chief Executive Officer (CEO) of the company. After taking control of the company, Soriot has laid emphasis on bolstering AstraZeneca’s pipeline.

For this purpose, the company is pursuing bolt-on acquisitions and small deals. AstraZeneca has entered into a number of acquisitions in the last few months.

In addition to acquisitions, the company is targeting co-development deals. Agreements with Karolinska Institutet (to conduct preclinical and clinical trials for candidates targeting cardiovascular and metabolic diseases), Moderna Therapeutics (to develop RNA therapeutics for the treatment of serious cardiovascular, metabolic and renal diseases and cancer), NGM Biopharmaceuticals, Inc. (to develop candidates for type II diabetes and obesity) and BIND Therapeutics (for the development and commercialization of cancer nanomedicine, Accurin) are efforts in this direction.

At present the company is facing several issues. The generic competition that AstraZeneca is currently facing or expects to face for its various drugs has put significant pressure on the company. Some of the key products like Arimidex and Seroquel are already facing generic competition in the US, while Nexium and Crestor generics are expected to enter the US market in 2014 and 2016, respectively.

AstraZeneca carries a Zacks Rank #4 (Sell). Companies that currently look well-positioned include Jazz Pharmaceuticals (JAZZ-Free Report) and Santarus, Inc. (SNTS-Free Report). While Jazz is a Zacks Rank #1 (Strong Buy) stock, Santarus carries a Zacks Rank #2 (Buy).

 

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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