Zacks Analyst Blog Highlights: Transocean, Diamond, Pride and GlaxoSmithKline

Business Wire, May 24, 2007

CHICAGO -- 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: Transocean (NYSE: RIG), Diamond (NYSE: DO), Pride (NYSE: PDE) and GlaxoSmithKline (NYSE: GSK).

See the latest posts to the Analyst Blog by visiting: http://at.zacks.com/?id=2673

Here are highlights from Wednesday's Analyst Blog:

Transocean Positives Priced In

We have increased our earnings estimates for Transocean (NYSE: RIG) to reflect the company's first-quarter out performance and continued momentum in dayrate gains. Our new 2007 and 2008 EPS [earnings per share] estimates are $7.90 and $11.42, up from $7.52 and $10.25, respectively. Though we expect revenue growth to accelerate backed by a record level of backlog and continually improving deepwater fundamentals, growing cost pressures are expected to limit a proportionate earnings gain.

We are maintaining our Hold recommendation as we continue to believe that the company's strong deepwater drilling leverage is already reflected in its premium valuation relative to its peers. Based on every conventional valuation metric, the stock is trading at a premium. As such, we expect limited upside from current levels. Our preferred offshore drillers remain Diamond (NYSE: DO) and Pride (NYSE: PDE).

Downgrading GSK from Buy to Hold

GlaxoSmithKline (NYSE: GSK) is the world's second-largest pharmaceutical company, with global operations based in the U.K. and the U.S. Although Glaxo has made significant progress with its late-stage pipeline, we are worried about the recent negative news surrounding the company's second-largest selling product, Avandia.

"A recently published article has raised questions on the product's safety profile. We believe that the issues surrounding Avandia will continue to weigh on the stock going forward. As such, we are downgrading our recommendation from Buy to Hold with a reduced price target of $57 per U.S. ADR [American Depositary Receipt]. Our price target is based on 15x our Fx [foreign exchange]-adjusted $3.81 estimate in 2007.

See the latest posts to the Analyst Blog by visiting http://at.zacks.com/?id=2645

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