Zacks Analyst Blog Highlights: CastlePoint Holdings, Tower Group, Moody's Corporation, CACI International and Pepsi Bottling Group

Business Wire, June 12, 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: CastlePoint Holdings, Ltd. (Nasdaq: CPHL), Tower Group, Inc. (Nasdaq: TWGP), Moody's Corporation (NYSE: MCO), CACI International, Inc. (NYSE: CAI) and Pepsi Bottling Group, Inc. (NYSE: PBG).

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Here are highlights from Wednesday's Analyst Blog:

Good Value for CastlePoint

CastlePoint Holdings, Ltd. (Nasdaq: CPHL) results were $0.29 per share, six cents below our expectation. The company continues to experience an increase in revenue as a result of higher net premiums and strong product demand. As a result of its strategic relationship with Tower Group, Inc. (Nasdaq: TWGP), CPHL has access to lucrative U.S. markets, without having had to incur significant costs associated with establishing a primary insurance company infrastructure. Thus, we maintain our Buy rating for the shares.

As a result of the first-quarter results and company guidance, we have maintained our FY08E and FY09E earnings expectations at $1.80 per share and $2.10 per share, respectively. We would expect current profitability and operation efficiency measures to be sustainable, if not exhibiting some improvement over the coming quarters, as the company continues to expand into the U.S. In addition, we would anticipate the tax rate to increase to 7-9% range.

Moody's Still Exposed to Risk

We maintain a Hold recommendation on the shares of Moody's Corporation (NYSE: MCO). A major slowdown in residential mortgages and poor credit market conditions are responsible for the decline in Moody's stock price as investors have grown increasingly concerned about its outlook. Moreover, the company's inaccurate credit rating on European debt securities exposes Moody's to new risks.

Moody's seeks to add value to company ratings by providing greater analysis of issues related to creditworthiness, including enhanced liquidity and cash flow analysis and evaluation of accounting and corporate governance issues. We believe that Moody's remains a solid franchise and will show substantial growth with its diversified business model and international growth. However, the company will face continuous pressure from negative headlines and likely face additional expenses related to increased regulation.

Demand for CACI Will Remain

We maintain our Buy rating on CACI International, Inc. (NYSE: CAI) after the company posted strong revenue of $634 million in Q3:FY08, up 34.1% year-over-year and up 9.8% quarter-over-quarter. EPS of $0.73 surpassed our estimate of $0.68.

The revenue growth was primarily driven by organic growth of 20%, specifically in the intelligence business, which was up 71% year-over-year. The management believes that the company's operating margin is stabilizing and expects it to increase to 8% over the next two years from 6.9% in the reported quarter. CAI raised its FY2008 revenue guidance from a range of $2.30-$2.40 billion to a range of $2.375-$2.425 billion while EPS should come around $2.65-$2.75. We have adjusted our FY2008/2009 revenue/EPS estimates accordingly with a target price of $55.

Pepsi Bottling Upgraded to a Buy

Pepsi Bottling Group, Inc. (NYSE: PBG) continues to execute well in a difficult soft drink environment. Contrary to competitors, volumes and net revenues are growing in every geographic region. The lackluster carbonated soft drinks (CSD) environment in North America is being addressed with a robust pipeline of new products and new initiatives in the refreshment and hydration categories. With the stock trading in the low-end of the historical valuation range, the stock is upgraded to Buy.

PBG's management is highly motivated and focused on the efficient manufacture and distribution of Pepsi-Cola products. Management's execution of business strategies has been superior to that of other major bottlers. While net revenue per case has been strong in the U.S., the company is expanding in higher growth geographies like Russia.

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