2008-06-11 12:07:35 -

- 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: Home Diagnostics, Inc. (Nasdaq: HDIX), Rite Aid Corp. (NYSE: RAD), Johnson & Johnson (NYSE: JNJ), Medtronic Inc. (NYSE: MDT) and Analog Devices,

Inc. (NYSE: ADI).

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Here are highlights from Tuesday's Analyst Blog:

Home Diagnostics' Target Upped

We expect Home Diagnostics, Inc.'s (Nasdaq: HDIX) earnings to be back-end loaded during 2008, due to seasonal issues and heavy selling and marketing expenses in the front half of the year. In January, HDIX negotiated a new exclusive co-branding agreement with Rite Aid Corp. (NYSE: RAD), which should help volumes in the second half of the year.

However, the company doesn't appear to be able to leverage expenses. Customer consolidation also reduces the growth outlook. We expect increased competition from Johnson & Johnson (NYSE: JNJ) and Medtronic Inc. (NYSE: MDT) will also likely pressure the top- and bottom-line. Increased consumer awareness will continue to fuel this group over the long-term.

Management guidance for 2008 EPS also reflects an assumed higher tax rate, lapsing of the research and development tax credit, and the tax benefit received in the first quarter. Our EPS estimate remains unchanged.

Given the risk factors, and low growth outlook, we believe the company will finish the year at the top of its guidance range. However, due to competitive factors, the stock should trade at a discount to comparables. At a 20-30% discount to the group average 1.3x 2008 P/E/G, we believe HDIX is fairly valued at $8.50. Our rating on the stock is Hold but our target price increases to $8.50.

Uncertain Times Keep ADI a Hold

We reiterate our Hold recommendation on Analog Devices, Inc. (NYSE: ADI) as the shares have good long-term potential, but given the uncertain macro economic situation, the valuation seems fair.

Analog Devices derives around half its revenue from the industrial market, which, according to World Semiconductor Trade Statistics (WSTS) data, should continue to exhibit strong growth through 2010. The high-margin communications business has also witnessed steady growth. Analog Devices is a debt-free company, with net cash per share of $4.09. ADI is expected to grow through increased penetration of the existing customer base.

A number of factors will influence semiconductor sales in 2008. The possibility of a recession in the U.S., presidential elections in November and the Olympic games are some of the external factors. The most important internal factor is the possibility of capacity shortage for the manufacture of non-memory chips.

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