Zacks Analyst Blog Highlights: AAR Corporation, AAON, STMicroelectronics, IBM and Mitsubishi UFJ Financial

Business Wire, April 9, 2008

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: AAR Corporation (NYSE: AIR), AAON (Nasdaq: AAON), STMicroelectronics N.V. (NYSE: STM), International Business Machines (NYSE: IBM) and Mitsubishi UFJ Financial Group, Inc. (NYSE: MTU).

See the latest posts to the Analyst Blog:

http://www.zacks.com/blog/post_info.html?g=6

Here are highlights from Tuesday's Analyst Blog:

AAR Corp. Expected to Rise

AAR Corporation (NYSE: AIR) provides goods & services to both the commercial airlines and the military services. On the commercial side, demand for AIR's offerings increases as the fleet of aircraft expands as well as ages. Requirements also grow as the airlines outsource more maintenance, repair and overhaul work. Additionally, for the defense sector, AIR designs and manufactures much-needed mobility products, aircraft internal cargo loading/unloading systems and composite structures.

During the third quarter, AIR's aircraft portfolio declined by two to 37, with 29 aircraft held in joint ventures and eight wholly-owned by AAON (Nasdaq: AAON). Sales to commercial customers increased by 30%, and sales to defense customers grew by 57%, year-over-year. Defense sales represented 39% of consolidated sales, up from 34% a year earlier. Organic sales growth for the quarter was 25% compared to an overall sales growth of 39%; almost all the sales increase from acquisitions occurred in the structure and systems segment.

We maintain our Buy recommendation for AIR and have adjusted our six-month target price slightly upward from $36 to reflect extant P/E ratios in the group of similar aerospace/defense stocks that we have followed while evaluating this stock. The average P/E for the aerospace/defense group is 16.8. Given AIR's May fiscal year, in six months, it will certainly be trading based on projected fiscal 2009 earnings (and perhaps beyond). Our projection for AIR for fiscal 2009 is $2.30 per share, fully-diluted; using the average P/E of 16.8 would engender a price of just over $38.64, which would indicate that AIR is a Buy at current levels.

STMicro with Short-Term Questions

STMicroelectronics N.V. (NYSE: STM) continues to upgrade products and forge strategic alliances in order to fuel long-term growth. The company reported an in-line 2007 fourth quarter in terms of revenues, driven by stellar performances from its ASP and IMS groups.

However, we still expect that the strengthening euro will ultimately lead to margin weakness, even as the company continues to cut costs. The restructuring of its manufacturing facilities -- through the opening of its Chinese facility as well as the initiation of a partnership with International Business Machines (NYSE: IBM) -- may enable the company to save on R&D spending, which could help alleviate some cost pressures.

Additionally, the sale of its flash memory unit, which is now delayed until the end of the first quarter of 2008, might also help improve margins. Also, the availability of a common platform for integrated digital TV (iDTV) sets worldwide will open up a new market for STM as it integrates digital and analog broadcasting into a single chip. The decision by the company to make a new acquisition (Genesis Microchip) at this juncture has us concerned regarding its impact on the current ratio in the present quarter before funds from divestment are realized.

Bullish on Mitsubishi UFJ Financial

We are continuing our Buy on Mitsubishi UFJ Financial Group, Inc. or MUFG (NYSE: MTU), as well as our $12.50 target price. MUFG is expected to report fiscal full-year (March 31) results in late May. We are maintaining our fiscal year EPADS estimates at $0.50 for 2008 and $0.62 for 2009. For 2008, this is broadly in-line with the company's reduced earnings forecast for the year of Y=600 billion (down 25% from Y=800 billion before).

MUFG reported fiscal nine months (December 31) earnings of Y=315 billion, down 54% year-over-year, largely reflecting a Y=341 billion increase in credit costs. This was due to Y= 55 billion in impairment losses on sub-prime and SIV investments, as well as the absence of a Y=140 billion reversal of the credit loss allowance as occurred in the prior-year period. MUFG completed a Y=150 billion share repurchase plan and raised its annual dividend by 27%.

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

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