Zacks Analyst Blog Highlights: Advanced Medical Optics, Xilinx and Hudson City Bancorp

Business Wire, Oct 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: Advanced Medical Optics, Inc. (NYSE: EYE), Xilinx (Nasdaq: XLNX) and Hudson City Bancorp (Nasdaq: HCBK).

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

Here are highlights from Tuesday's Analyst Blog:

Looking at EYE More Positively

Based on valuation, we raised our recommendation on shares of Advanced Medical Optics, Inc. (NYSE: EYE) to a Hold. AMO announced a new CFO, the launch of a global campaign to educate contact lens wearers about proper lens cleaning, and a U.S. patent licensing agreement with Carl Zeiss Meditec AG. AMO is scheduled to report Q3 results on October 25.

We previously lowered our FY07 sales and EPS estimates. Due to another recall of the COMPLETE MoisturePlus multi-purpose solution, management previously reduced its 2007 & 2008 guidance, which was reiterated at the end of Q2. AMO began the launch of another version of the COMPLETE multi-purpose solution with guidelines that emphasize following a rub and rinse regimen to effectively clean and disinfect the lens in Q3. Our price target is based on roughly 20x FY08 EPS estimate.

At its current price of $29.78 per share, AMO is trading at roughly 19x our 2008 earnings estimate of $1.58 per share and roughly a 1.0x P/E/G on 2008 EPS estimate, at a discount to the peer group P/E multiple of roughly 20x and also at a discount to the group 2008 P/E/G of roughly 1.2x. Growth in 2007 is depressed by the lost sales and incremental costs related to the May 2007 recall of the COMPLETE multi-purpose solution and further on the dilutive impact of the IntraLase acquisition.

Buy-Rated XLNX Gets New Target

Xilinx (Nasdaq: XLNX) reported its fiscal Q2:08 results recently. Revenues came in at $444.9 million, slightly below our estimate of $446 million. GAAP EPS of $0.30 came in a penny ahead of our $0.29 estimate. Excluding stock compensation, proforma EPS for the quarter was $0.35. GAAP gross margin of 61.8% was below both on a sequential basis and the company's guidance of 62%-63%. Excluding two one-time charges, pro-forma gross margin came in at 62.8%. Operating margin also fell slightly to 21.2% compared to 21.9% in the prior quarter.

Forward guidance of 2%-6% revenue growth is significant, because if the company performs within this guidance range, Q3 will be the first sequential growth quarter in six quarters. We have adjusted our Q3 and FY2008 estimate accordingly. We continue to rate Xilinx a Buy and have adjusted our target piece to $31.

We believe the company's growth will reaccelerate given the competitive advantages of the company's 90-nm and 65-nm technologies as well as the end to an inventory correction in the industry. However, given the declining q/q revenue growth, we would like to see better performance in the December quarter.

Sell Hudson City Ahead of Earnings

Hudson City Bancorp (Nasdaq: HCBK) intends to release of its 3Q07 results prior to the market's opening on October 24, 2007. The company's highly leveraged balance sheet with an overwhelming securities portfolio remains a source of bewilderment for us, considering the excess capital on the books.

The shares have experienced a rebounding of late, aided by the share buybacks programs. However, overall negative sentiment with respect to credit quality industry-wide still weighs on the group presently. While results for this company appear to be gaining some traction and we view the dividend as being secure at present, this leads us to raise our price target (still below the current price).

However, until the company exhibits a few more positive data points, we continue to view the shares of this company as a Sell. HCBK currently trades at 21.6x the consensus forward estimate (versus 18.7x at the time of our last report), a 24% discount to the peer group median. On a price-to-book basis, the shares trade at a substantial premium of 36% to the peer median, versus an 8% premium in late July.

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

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