Zacks Bull and Bear of the Day Highlights: Celanese, Primus Guaranty, Canadian National Railway, Net Servicos and Smith International

Business Wire, April 24, 2008

CHICAGO -- Zacks Equity Research highlights Celanese Corp. (NYSE: CE) as the Bull of the Day and Primus Guaranty, Ltd. (NYSE: PRS) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Canadian National Railway Company (NYSE: CNI), Net Servicos (Nasdaq: NETC) and Smith International (NYSE: SII). Full analysis of all these stocks is available at http://at.zacks.com/?id=2676.

Here is a synopsis of all five stocks:

Bull of the Day: Celanese Corp. (NYSE: CE)

Celanese has a strong growth strategy, with development in Asia as a key factor. There is $400 million of free cash flow per year primarily focused on share repurchase. Higher pricing on continued strong global demand for Acetyl Intermediates products, positive currency impacts, growth in Asia supported by the company's new acetic acid unit in Nanjing, China, as well as sales of Industrial Specialties from the acquired Acetate Products Limited are driving the company's sales. In addition, the company has leadership positions in oligopolistic markets that have solid fundamentals. As a result, we rate the shares a Buy with a target of $50.00.

Bear of the Day: Primus Guaranty, Ltd. (NYSE: PRS)

PRS is scheduled to release its 1Q08 results on May 5, 2008, with a conference call scheduled for the next day. The company's 4Q07 economic results were substantially worse than the estimates. The miss mainly stemmed from a $40.9 million credit event provision. We anticipate that higher provisions and mark-to-market losses, due to challenging credit environment will continue to impact the results in the coming quarters; though the company may be able to grow its credit protection business at attractive prices, as the credit spreads continue to widen. Ahead of the results, we are maintaining our Sell recommendation and six-month target price on the shares of PRS.

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Canadian National Railway Company (NYSE: CNI)

We are maintaining our Hold on Canadian National Railway Company, or CN, but raising our target price to $52. CN reported first quarter earnings of C$301 million before nonrecurring items, down 7% year over year and below our estimate due to the combined headwinds of a stronger Canadian $ and higher costs from severe winter weather.

CN's operating ratio declined 230 basis points, rising to 72.9%. Revenues declined 1% to C$1.9 billion, reflecting weakness in forest products (off 20%) from an anemic US housing market and automotive (down 12%). Positively, pricing continued strong (rate increase per unit up 4%). We expect these trends to continue over the near term, and are reducing our 2008 diluted EPS estimate to $3.52 from $3.65, while initiating our 2009 estimate at $3.98.

Net Servicos (Nasdaq: NETC)

We are reiterating our Buy recommendation on Net Servicos. We are encouraged by its solid operating results during 2007 and the first quarter of 2008. We expect this trend to continue in the short term due to the current positive economic environment in Brazil, despite the recent domestic interest rate hike.

The outlook for Brazilian real in the short term remains positive, and that will help reduce the interest expenses in the following quarters. Additionally, its voice service and broadband product's performance remains highly encouraging.

Currently, NETC is trading with a valuation of 19.9x our 2008 expected earnings. It is important to remember that the company has a long tradition of weak results; however, we are convinced that NETC is now in a positive cycle and that should include continued growth in its subscriber base, positive cash flow generation and increasing net income.

Smith International (NYSE: SII)

Smith International, Inc. posted solid first-quarter 2008 results, primarily driven by increased oilfield segment business. On a year-over-year basis, revenue and earnings grew 12.5% and 14.6%, respectively.

The quarterly results show improved oilfield margins and solid free cash flow generation. While we continue to expect strong revenue and margin expansion, aided by demand acceleration, price increases, and cost discipline, we believe that current valuation already discounts these positives, thereby leaving our Hold recommendation unchanged.

On April 22, 2008, Smith International reported weaker-than-expected first-quarter 2008 earnings of $175 million or $0.87 per share (our estimate was for $0.90 per share), compared to $152.7 million or $0.76 per share in the year-earlier quarter and $167 million or $0.83 per share in the prior quarter. The year-over-year earnings gain was driven by higher oilfield segment business volumes, which increased 17% over the prior-year period. We are keeping our 2008 and 2009 EPS estimates unchanged at this level.

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.