For Immediate Release
Chicago, IL – October 3, 2012 – Zacks Equity Research highlights Discover Financial Services' (DFS) as the Bull of the Day and Scientific Games Corp. (SGMS) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Roche Holdings Ltd. (RHHBY), GlaxoSmithKline (GSK) and ImmunoGen Inc. (IMGN).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Discover Financial Services' (DFS) third quarter earnings surpassed the Zacks Consensus Estimate and year-ago earnings on the back of revenue growth and reduced charge-offs. Moreover, operating performance of the Payment Services segment was impressive, which contributed to bottom-line growth. Higher transaction and credit card sales volumes as well as record-low delinquency and charge-off rates were the positives.
The introduction of home loan products also boosted revenues apart from diversifying the product portfolio. The company's extensive network, sound capital position, stable ratings, rapidly expanding acceptances and cost-containment initiatives will help accentuate growth over the long term.
Our six-month target price of $48.00 equates to 11.3x our earnings estimate for 2012. Given the annual cash dividend of $0.40, this price target implies an expected total return of 21% over that period. This is consistent with our Outperform recommendation on the shares.
Scientific Games Corp. (SGMS) reported dismal second quarter results due to higher expenses. Instant lottery sales declined in Italy and China, which remains a major headwind in the near term.
We believe that the visibility regarding its privatization and outsourcing of state lottery management, while a major growth opportunity, remains murky, thereby adding significant uncertainty to the stock. Moreover, increasing investments for product development and strong competition is expected to hurt profitability in the near term.
Overall, this negative scenario compels us to downgrade the stock to an Underperform recommendation. We set a price target of $7.25, which implies a P/E multiple of 80.6X our 2012 earnings, a premium to both industry and S&P 500 average.
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Roche Oncology Candidate Progresses
Roche Holdings Ltd. (RHHBY) recently announced additional results from its phase III EMILIA study, which was conducted with trastuzumab emtansine. The study compared trastuzumab emtansine to GlaxoSmithKline’s (GSK) Tykerb (lapatinib) along with Xeloda (capecitabine) in HER2-positive unresectable locally advanced or metastatic breast cancer patients who were previously treated with Herceptin and taxane chemotherapy.
Results showed that patients who were treated with trastuzumab emtansine survived longer (risk of death was reduced by 32%) than those who were treated with the combination of lapatinib and Xeloda. Median overall survival was higher in the trastuzumab emtansine arm compared to patients receiving lapatinib and Xeloda (30.9 months vs. 25.1 months).
Roche now plans to offer patients in the Tykerb and Xeloda arm the option of being treated with trastuzumab emtansine.
Notably, in June this year, Roche had announced that the EMILIA study met its co-primary endpoint of progression-free survival (PFS). The study revealed that patients receiving trastuzumab emtansine showed 35% lower risk in disease worsening or death than those who received lapatinib and Xeloda.
Then, in August, the company announced that trastuzumab emtansine significantly improved overall survival (:OS) in patients suffering from HER2-positive metastatic breast cancer in comparison to the combination.
Under an agreement with ImmunoGen Inc. (IMGN), Genentech, a member of the Roche Group, licenses technology for trastuzumab emtansine. Genentech submitted a Biologics License Application (:BLA) for the candidate to the US Food and Drug Administration (:FDA) for use in women suffering from HER2-positive, unresectable locally advanced or metastatic breast cancer. Roche also submitted a marketing authorization application for trastuzumab emtansine to the European Medicines Agency (:EMA) for the same indication.
We remind investors that Roche had earlier submitted a BLA seeking accelerated approval for the candidate in July 2010 on the basis of mid-stage trial results. However, in August 2010, the FDA had refused the application because it believed that the patients in the phase II study had not tried all possible medications available for the treatment of metastatic breast cancer. Roche had then decided to continue with its EMILIA study to support the re-submission of the BLA.
Roche carries a Zacks #1 Rank (Strong Buy rating) in the short run. We are pleased with the company’s progress with its oncology candidates. We expect several Roche oncology products to hit the market in the coming years.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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