Zacks Analyst Blog Highlights: Charlotte Russe Holding Inc., EOG Resources, Inc., CF Industries Holdings Inc., Thornburg Mortgage Inc. and VeraSun Energy Corp

Business Wire, August 1, 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: Charlotte Russe Holding Inc. (Nasdaq: CHIC), EOG Resources, Inc. (NYSE: EOG), CF Industries Holdings Inc. (NYSE: CF), Thornburg Mortgage Inc. (NYSE: TMA) and VeraSun Energy Corp. (NYSE: VSE).

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Here are highlights from Thursday's Analyst Blog:

Charlotte Russe Lowered to Sell

Charlotte Russe (Nasdaq: CHIC) reported disappointing fiscal third-quarter results, and management indicated that the problems will continue into the fourth quarter. CHIC shares may look cheap at these levels, but we expect further deterioration in its business. The recent miss and weak guidance is due to negative comp-store sales, higher markdowns, and operating expense de-leveraging.

The macro headwinds, including declining home prices and rising food and energy prices, are reducing the consumer's ability to spend on discretionary items are hurting Charlotte Russe. The company is opening 57 new stores in fiscal 2008 and another 20-30 in fiscal 2009. We think it is a mistake to open new stores while its existing stores are struggling. These factors combined with the retirement of its Chief Executive retiring will continue to pressure Charlotte Russe's profit margin.

EOG Resources a Core Holding

EOG Resources, Inc.'s (NYSE: EOG) quarterly results came in better-than-expected, reflecting increased volumes and improved commodity-price realizations, partly offset by higher costs. Domestic natural gas production grew 19%, while liquids volumes rose 51% over last year.

Additionally, the company raised its quarterly dividend by 12.5% to $0.135 a share. With robust growth from most of its core areas, EOG remains on track to achieve production growth of 15% this year and approximately 14% over the following two years. We maintain our Buy recommendation on EOG shares and see the stock as a core holding in the large-cap exploration and production (E&P) space.

CF Industries a Buy to $175

On July 28, CF Industries Holdings (NYSE: CF) reported net earnings of $5.02 per diluted share for the first quarter versus $1.65 per share for the same quarter a year ago. Strong domestic and international grain markets have produced an exceptionally high global demand for fertilizer, translating into substantially higher selling prices for all the products.

The company is optimistic about its phosphate business where the market is expected to remain tight near term due to healthy offshore demand growth in India and Brazil as well as higher application rates in the US. This is likely to lead to higher prices and cash margins for various fertilizers. In addition, the company is likely to benefit from the proposed nitrogen facility in Peru. We rate CF Industries shares a Buy and set a price target of $175.00.

Thornburg Faces Dire Straits

Thornburg Mortgage (NYSE: TMA) was forced to raise $1.35 billion from the sale of senior subordinate notes to meet margin calls. To get the emergency funding, the company had to sell out current common and preferred shareholders.

Common shareholders will be diluted by up to 95% due to new share issues and preferred shareholders are being asked to take a little over 20% of their initial investment as the company tries to buy back its preferred. Any investment in TMA is risky at this point. Common shares a now virtually worthless due to massive dilution, and there is a good chance that TMA will be de-listed or even be forced into bankruptcy.

VeraSun Still Trades at Discount

VeraSun Energy Corporation (NYSE: VSE) is on the fast track of growth with its recent merger with fellow biofuel company U.S. BioEnergy (USBE). Earnings rose in the first quarter due to higher ethanol volumes and prices, partially offset by surging corn prices. Post-merger, the company is expected to become the largest bio-fuel company in the world.

However, the cyclicality of the ethanol industry and rising prices of corn and natural gas, remain a concern. Nevertheless, recent bullishness on the energy bill for ethanol production, rising crude oil prices, ongoing capacity expansion plans and value unlocking through synergies from the recent merger with USBE should maintain growth momentum over the near term. Accordingly, we maintain a Buy recommendation on VSE with a six-month target price of $7.00, representing 16.3% upside potential.

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