Zacks Bull and Bear of the Day Highlights: Baker Hughes, Hibbett Sports, UTStarcom and McCormick & Schmick

Business Wire, Nov 28, 2007

CHICAGO -- Zacks Equity Research highlights Baker Hughes, Inc. (NYSE: BHI) as the Bull of the Day and Hibbett Sports (Nasdaq: HIBB) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on UTStarcom (Nasdaq: UTSI) and McCormick & Schmick (Nasdaq: MSSR). 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 Baker Hughes, Inc. (NYSE: BHI). Being a premium oilfield service player, the company remains well positioned to capitalize on the current oilfield cycle. This is already reflected in the company's recent results. We expect continued margin expansion, powered by pricing gains in all major operating regions of the world. We continue to view Baker Hughes as a core oilfield service holding. We have adjusted our 2007 earnings estimate ($4.79 vs. $4.76) to reflect the quarterly gain. Our 2008 estimate, Buy recommendation, and price objective remain unchanged.

Bear of the Day:

Our Bear of the Day recommendation is for Hibbett Sports (Nasdaq: HIBB). Hibbett reported third quarter sales that were flat year-over-year. Earnings per share were at the high end of its guidance and $0.05 above our estimate. Even so, the company's EPS outlook for the fourth quarter was below consensus estimates and in line with our previous estimate. We do not expect Hibbett's weak sales trends or contracting profit margins to improve in the short term, as the consumer spending environment is worsening. Given the difficulties facing retailers, Hibbett's 20x P/E multiple is ripe for contraction. As a result, we maintain our Sell rating and lower our target price from $17.50 to $16, which is 12x our fiscal year 2009 EPS estimate.

Analyst Blog:

We maintain our Sell recommendation with a reduced valuation target for UTStarcom (Nasdaq: UTSI), in spite of the fact that the company's third quarter 2007 earnings results were slightly better than our estimates. Lack of business momentum and a precipitous decline in gross margins remain our major areas of concern over the near term. UTStarcom is committed to expand its telecom offerings, but we do not expect such initiatives to yield profits until 2010. The company's financials do not reflect the anticipated synergies derived from the recently concluded restructuring activities that we were expecting. UTStarcom is heavily dependent on the success of its IPTV and optical transport products. Furthermore, the company received a notice of possible default on some part of its convertible debts. UTStarcom is difficult to value on the basis of P/E in view of its negative earnings. On the basis of enterprise value (EV) to 2008 sales, UTStarcom is trading at 0.05x, which is significantly below the 0.8x peer group average.

McCormick & Schmick (Nasdaq: MSSR) is well positioned, in our view, to generate high-teens annual EPS growth over the next five years by executing on its business plan to open new units at a rate of 13%-15% annually, increase same-store sales at its historical average rate of 2%-3%, and expand margins slightly through economies of scale. MSSR is well positioned in the upscale segment of the market, which is less susceptible than the casual dining segment to the impact of rising gas prices and mortgage rates plaguing the less affluent consumer. However, traffic is declining and we think the stock's valuation fairly reflects MSSR's EPS growth prospects against the increasing risks presented by rapid unit growth in an inflationary, slowing economy. Shares of MSSR are currently trading at just 15.5x our 12-month forward EPS estimate, in line with its 3-year growth rate and roughly in with its growth stock peers, which are trading at a PEG of about 1.1x.

Get the full analysis of all these 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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