Zacks Analyst Blog Highlights: International Business Machines Corp., DuPont Co., XL Capital, Ltd., Rudolph Technologies, Inc. and Dillard's, Inc.
2008-08-28 12:03:02 -
- 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: International Business Machines Corp. (NYSE: IBM), DuPont Co. (NYSE: DD), XL Capital, Ltd. (NYSE: XL), Rudolph Technologies, Inc. (Nasdaq: RTEC) and Dillard's, Inc. (NYSE: DDS).
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Here are highlights from Wednesday's Analyst Blog:
IBM Growth Sustained Worldwide
With over half of its revenue (58%) coming from outside the United States, International Business Machines Corporation (NYSE: IBM) has been more insulated from recent weakness in the U.S. economy than many of its peers.
Further, we are encouraged with IBM's focus on more profitable businesses, such as software and services, and exit of low-margin businesses. IBM has strengthened its position through strategic investments and acquisitions in emerging higher value segments like SOA, Information on Demand, business process services, and open modular systems.
DuPont Relying on Ag Business
Non-G7 markets, agricultural chemicals and a focus on key customers and new products will drive growth for DuPont Co. (NYSE: DD). Strong performance in the agricultural products market, emerging markets, pricing actions, favorable currency and productivity is likely to outweigh increasing costs as well as weak auto and housing markets. The company is focusing on nearly doubling its earnings growth rate.
However, slowing demand in U.S. markets is likely to offset growth in the agriculture market. DD expects second half 2008 earnings per share to be lower than the last year due to higher energy and ingredient costs, lower demand in developed markets, lower income from asset sales and a higher effective tax rate. This compels us to rate the stock a Hold with a target of $41.50.
XL Capital Estimates Lowered
XL Capital, Ltd.'s (NYSE: XL) 2Q08 results significantly missed expectations. There was some noise in the quarter, and we expect some more of it in 3Q08.
To maintain its strong capital position, the company issued $2.5 billion of equity capital and reduced dividend by 50%. The initiatives taken to resolve SCA issues will cost the company a charge of $1.4-1.5 billion in the next quarter. Along with this, a charge of $50-60 million is also expected, as a result of XL's expense reduction drive. Decreasing premium rates across insurance as well as reinsurance segment along with ratings downgrade continue to bother us.
Rudolph Tech Expects Better '09
June quarter top and bottom-line results for Rudolph Technologies, Inc. (Nasdaq: RTEC) beat consensus estimates. The company recently closed two acquisitions involving front-end and back-end business that more than doubled the size of the firm.
Orders were cut drastically over the past few quarters. The question of whether they are being pushed out or canceled is very important for investors to consider. Until this becomes clearer, we would be on the sidelines. We are reiterating our Hold rating on RTEC.
Dillard's Difficulties Priced In
The company's recent results show that Dillard's, Inc.'s (NYSE: DDS) operations continue to struggle. We are estimating further declines in over the next few years. Its stock price reflects this view. Despite its poor operating results and weak near-term outlook, we maintain our Hold rating.
Our neutral view comes from the activist shareholders that are pushing the Dillard's management team to unlock shareholder value, and the company is responding. Dillard's recently announced a plan to close underperforming stores, reduce capital expenditures, reduce expenses, and execute merchandise improvements. This plan is step in the right direction to improve the company's operations and could eventually bring Dillard's results in-line with its department store peers.
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