Zacks Analyst Blog Highlights: Kimberly-Clark, Procter & Gamble, CuraGen, Microchip Technology and Repsol YPF

Business Wire, June 25, 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: Kimberly-Clark Corporation (NYSE: KMB), Procter & Gamble (NYSE: PG), CuraGen Corporation (Nasdaq: CRGN), Microchip Technology, Inc. (Nasdaq: MCHP) and Repsol YPF S.A. (NYSE: REP).

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Here are highlights from Tuesday's Analyst Blog:

Competition for Kimberly-Clark

Kimberly-Clark Corporation (NYSE: KMB) has strong consumer brands and is well respected for product innovation, especially in the diaper category. Rising raw material costs, weak European operations, and competitive pressures are constraining earnings growth despite the company's progress on three cost savings programs - FORCE, the Global Business Plan, and the Strategic Cost Reduction Plan.

The company has strong free cash flow. It has repurchased shares, financed in part by the issuance of debt, in order to achieve EPS growth targets. However, in the attempt to balance growth and profitability, the management faces many challenges, especially as Procter & Gamble (NYSE: PG) poses a significant market-share threat to the diaper business.

CuraGen Risk/Reward Balanced

The proceeds from the sale of Belinostat, for treating solid tumors and hematologic malignancies, strengthened CuraGen Corporation's (Nasdaq: CRGN) balance sheet, but further weakened its pipeline, especially after the termination of its key clinical program Velafermin for the treatment of severe oral mucositis. We see this deal to be neutral to the company.

The failure of the Velafermin program, due to lack of efficacy, is a big setback for CuraGen. The company has only one candidate in clinical development now, CR-011, for breast cancer in addition to melanoma indication.

Competition Pressures Microchip

We continue to see Microchip Technology, Inc. (Nasdaq: MCHP) well-positioned in its core microcontroller market for several reasons. First, the company continues to be a leading player in the 8-bit microcontroller space. Moreover, the company is targeting the high-performance 16-bit microcontroller market and demand is reflecting strong momentum.

Meanwhile, in the fourth quarter of fiscal 2008, the company reported revenues of $260.4 million, which were up 0.8% year over year and higher than our estimate of $255 million. GAAP EPS of $0.40 came in above the updated guidance of $0.36-$0.38 (previously $0.35-$0.38), easily beating consensus estimate of $0.37, namely due to a one-time tax advantage.

Neutral on Gas Producer Repsol

We are maintaining our Hold recommendation on Repsol YPF S.A. (NYSE: REP) ADRs following the quarterly results, which benefited from higher commodity prices and improved refined product mix. We also like the company's recent exploratory successes and the move to reduce its Argentine exposure.

However, we continue believe that the challenges facing the company will continue to weigh on valuation, limiting its upside from current levels. This is characterized by declining reserves, weak volumes, very low reserve lives, and rising costs. The company's proved reserves declined nearly 28% in the last two years.

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