Zacks Bull and Bear of the Day Highlights: Plexus, Georgia Gulf, Portfolio Recovery Services and Headwaters

Business Wire, Jan 3, 2008

CHICAGO -- Zacks Equity Research highlights Plexus Corp. (Nasdaq: PLXS) as the Bull of the Day and Georgia Gulf (NYSE: GGC) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Portfolio Recovery Services (Nasdaq: PRAA) and Headwaters, Inc. (NYSE: HW). 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 Plexus Corp. (Nasdaq: PLXS). Plexus has posted several quarters of strong results and raised guidance, indicating that it is passed the problems that plagued it earlier in the fiscal year 2007. Moreover, the company continues to work through problems in Mexico and should break-even over the next few quarters. We believe that PLXS is among the best positioned in the industry and is poised to grow in the medical segment as well. We therefore raise our rating on PLXS shares and set six month price target of $40.00.

Bear of the Day:

Our Bear of the Day recommendation is for Georgia Gulf (NYSE: GGC). Georgia Gulf recently overpaid for Royal Plastics, a supplier of housing products. The acquisition was entirely financed with debt, and the company is in danger of violating debt covenants. Remaining product lines are suffering from increases in capacity. As a result, we have a Sell rating with a target of $6.00.

Analyst Blog:

Portfolio Recovery Services (Nasdaq: PRAA) reported 3Q07 net income of $11.7 million or $0.75 per diluted share, which was a nickel below our estimate and six cents below consensus. The company attributed the miss to increased interest expense, higher-than-normal allowance charge and increased staffing. While the debt purchases increased substantially during the quarter, based on higher supply and soft pricing; the cash collections were almost flat sequentially. The management announced some re-engineering initiatives focused on productivity, which has continued to decline during the last two quarters. Current relative valuation looks rather full at this point in time. Based on weaker-than-expected 3Q07 results, we have moderated our FY07 and FY08 estimates, down to $3.08 per share and $3.44 per share from $3.21 per share and $3.69 per share, respectively. While the debt purchases were up 114% during the first nine months of 2007 compared to the same period in 2006 (as there was increased supply in the market and slightly soft pricing), the cash collections have come in below our estimates during the last two quarters after a solid first quarter of 2007.

Headwaters, Inc. (NYSE: HW) reported fourth quarter EPS of $0.59, slightly above our expectations of $0.58, amid higher sales across all divisions and a year-over-year margin increase in both the coal combustion products (CCP) and construction material segments. Increasing acceptance of fly ash by concrete producers and past acquisitions will continue to support profitability. However, sales of the construction materials division remain vulnerable to the ongoing weakness in the residential housing market. Currently, the shares of Headwaters are trading at 9.6x our FY08 earnings estimate of $1.26 per share. In the past, the company's earnings benefited from acquisitions and a strong demand for its fly ash and construction materials products. Almost 70% of revenue is tied to the building materials business while the remainder heavily tied to Section 45K (formerly Section 29) tax credits. Over the next couple of quarters, Headwaters earnings are at risk due to the downturn in residential construction activity and the likely phase out of Section 45K tax credits.

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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