Zacks Bull and Bear of the Day Highlights: Sinopec, SurModics, Satyam and School Specialty

Business Wire, April 24, 2007

CHICAGO -- Zacks Equity Research highlights Sinopec (NYSE: SNP) as the Bull of the Day and SurModics, Inc. (Nasdaq: SRDX) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Satyam Computer Services (NYSE: SAY) and School Specialty (Nasdaq: SCSH). Full analysis of all four stocks is available at http://at.zacks.com/?id=2676.

Here is a synopsis of all four stocks:

Bull of the Day:

Our Bull of the Day recommendation is for Sinopec (NYSE: SNP). Sinopec recently reported strong quarterly results for the first quarter of 2007. While a number of uncertainties remain, we believe that the near- to medium-term environment supports its continued upstream production growth and downstream capacity expansion. Moreover, Sinopec's integrated petrochemical and refining businesses are expected to benefit from possible price reform for refined products in China. Therefore, we are maintaining our Buy recommendation on Sinopec. While there are uncertainties including government price controls that may squeeze downstream margins, volatility in crude oil prices, and rising domestic competition, we believe that the near to medium-term environment remains supportive to its upstream production growth and downstream capacity expansion. Moreover, Sinopec has the most integrated petrochemical and refining businesses in China and possible refined-product price reforms will benefit it.

Bear of the Day:

Our Bear of the Day recommendation is for SurModics, Inc. (Nasdaq: SRDX), which provides surface modification and drug delivery technologies to medical device and pharmaceutical companies. The company derived 47% of its revenue from the Drug Delivery segment in 2006, and revenue from Cypher Stent from Cordis has constituted a significant portion of the revenue from the Drug Delivery segment. We see continued pressure on Cypher Stent sales due to fierce competition and industry contraction as a whole. As such, we maintain our Sell rating on SurModics shares with a target price of $33 per share. We believe SurModics must diversify its revenue source in order to deliver sustainable growth.

Analyst Blog:

We were pleasantly surprised by the strength of Satyam Computer Services (NYSE: SAY) fourth quarter financial results, as it beat our revenue and earnings estimates. The strength of the Indian rupee against the U.S. dollar, along with continued wage hikes hindered margin expansion in the quarter, although the company has made great strides in lowering its attrition rate, while improving its utilization rate in the quarter. Based on these solid results, we have raised our fiscal 2008 revenue and earnings expectations for the company, although we are maintaining our Hold rating at this time. We have, however, raised our price target to $27.00, based SAY selling between 22x-25x our new 2008 EPS [earnings per share] estimate of $1.14.

On April 18, School Specialty (Nasdaq: SCSH) announced a three-part restructuring plan to focus on its core assets. The company also reduced guidance for fiscal year 2007. We are reducing our 2007 and 2008 EPS [earnings per share] forecasts to reflect the lower guidance and limited visibility resulting from its restructuring plan. We are also lowering our target price from $41 to $36, due to our lower estimates. All told, the company's industry-leading market position and smart acquisition strategy are offset by growing competitive pressures and poor near-term visibility. We maintain our Hold rating.

Get the full analysis of all four stocks by going to http://at.zacks.com/?id=2649.

About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

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