Zacks Bull and Bear of the Day Highlights: Norfolk Southern, Atmel Corp., Amdocs and Caterpillar

Business Wire, Nov 21, 2007

CHICAGO -- Zacks Equity Research highlights Norfolk Southern Corp. (NYSE: NSC) as the Bull of the Day and Atmel Corp. (Nasdaq: ATML) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Amdocs Ltd. (NYSE: DOX) and Caterpillar (NYSE: CAT). Full analysis of all these 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 Norfolk Southern Corp. (NYSE: NSC). We are maintaining our Buy rating on Norfolk Southern, as well as our $59 target price. NSC is the cheapest stock in the rail industry, and is an attractive value at this price. NSC reported second quarter EPS of $0.98, $0.04 above consensus and meeting our estimate. Revenues fell 1% due to a 4% volume reduction on declines in five of seven sectors, reflecting weakness in the auto and housing markets. Positively, pricing held up well with revenue yield up 4%, and costs were well controlled. We are maintaining our diluted EPS estimates at $3.85 for 2007 and $4.35 for 2008. We expect results to benefit from a pick-up in growth in the second half, improved pricing on contract renewals, and a reduced tax rate from synthetic fuel credits. NSC raised its annual dividend for a second time this year by 18%, following a 22% rise in January.

Bear of the Day:

Our Bear of the Day recommendation is for Atmel Corp. (Nasdaq: ATML). Management guided Q3 revenues up 1%-3%, slightly lower than expected, with gross margin expectation of 35.7%-36.0%. Operating expenses are also expected to trend marginally higher. Restructuring efforts are likely to continue in the coming quarters. However, ongoing concern over pricing pressures in its memory and ASIC businesses (SmartCard products) and lack of specifics about its restructuring programs and potential benefits, we maintain our Sell rating and target price of $4.75.

Analyst Blog:

We maintain our Buy rating and the same valuation target for Amdocs Ltd. (NYSE: DOX), a leading provider of CRM and billing software to telecom carriers, as the company continues to improve financial results. Although revenues in the fourth quarter of fiscal 2007(ended September) were slightly below our forecast, net income was above our estimate due to a reduction in operating costs and a favorable tax audit resolution in the U.S. We believe Amdocs continues to benefit from large transformation projects at many telephone carriers with converged & consolidated network solutions. Amdocs maintains a healthy financial position, strong order backlog, and major new contracts being consummated on a global basis. Moreover, the board of directors implemented a share repurchase plan to increase shareholder return. The current valuation of the stock, near its 52-week low, is also considered to be more favorable.

Caterpillar (NYSE: CAT) reported third quarter EPS of $1.40, above our estimate of $1.37, due to higher-than-expected EAME (European, Africa and Middle East) machine sales and improved price realization. Given the better-than-expected third quarter results, we are upping our FY07 EPS estimate to $5.50 from $5.47. Our fourth quarter EPS estimate remains unchanged at $1.63. The growth in international markets, driven by the rise in commodity prices generally, should offset weakness in the North American residential market this year and next. We reiterate our Hold recommendation on shares of CAT, with a price target of $70.00. Currently, Caterpillar shares are trading at 12.6x our revised 2007 earnings estimate of $5.50 per share, which is at a discount to its peer group, the market multiple and the industry multiple. The company will benefit from its greater exposure to fast growing markets, machine mining, energy and public construction.

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

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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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