Zacks Analyst Blog Highlights: Baker Hughes, Schlumberger, Pactiv, Charlotte Russe and JA Solar Holdings

Business Wire, May 2, 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: Baker Hughes, Inc. (NYSE: BHI), Schlumberger (NYSE: SLB), FEMSA (NYSE: FMX), Coca-Cola FEMSA (NYSE: KOF) and JA Solar Holdings Co. Ltd.'s (Nasdaq: JASO).

See the latest posts to the Analyst Blog: http://www.zacks.com/blog/post_info.html?g=6

Here are highlights from Thursday's Analyst Blog:

At Baker Hughes, Expect Strength

We are maintaining our Buy recommendation on Baker Hughes, Inc. (NYSE: BHI) shares following the company's quarterly results, which came in below our estimate which was above consensus. Baker Hughes shares trade at a discount to its peers despite the company's strong oilfield service franchise and growing international footprint. The company enjoys strong leverage to the current oilfield cycle, being the leader in a number of product and service categories. More than 70% of Baker Hughes revenue comes from products and services where it has the highest or second highest market share.

Management has made steady progress over the last few years in repositioning the company by divesting non-core assets and instituting greater capital discipline. The variance from our estimate was largely due to higher costs. While we have lowered our 2008 ($5.28 vs. $5.45) and 2009 ($6.15 vs. $6.30) earnings estimate, our long-term outlook continues to remain positive.

We expect strong, powered by an improved North American outlook and continued international expansion. Being a premium oilfield service player, the company remains well positioned to capitalize on the current oilfield cycle.

On relative valuation grounds, Baker Hughes shares are attractive at current levels, compared to its large-cap peers. We believe that the new Baker Hughes deserves a relatively modest valuation discount to Schlumberger (NYSE: SLB), if at all, compared to the current level. This is the primary reason for our continued positive outlook for the stock. Our unchanged $90 price objective is based on 2008 P/E and EV/EBITDA multiples of 17.1x and 11.3x, respectively. Our target multiples are well within historical trading ranges for the stock.

FEMSA Looks Encouraging

We are reiterating our Buy recommendation on Fomento Economico Mexicano, S.A. de C.V. also known as FEMSA (NYSE: FMX). The company posted positive results for the first quarter 2008, including a good performance in the key Mexican market. Coca-Cola FEMSA's results were particularly encouraging, including good results in Brazil and Argentina and more positive numbers in Mexico. FEMSA Comercio continues to post quite encouraging results, a trend that has been going on for many quarters. Finally, the company was able to compensate higher raw material costs reducing administrative expenses.

Currently, FEMSA is trading at 17.7x our 2008 EPS estimate, slightly above the industry mean and median. The company has a decent medium-term growth potential, since Latin America is one of the most promising areas for the beverage industry, due to favorable demographic trends and the still positive economic outlook. Additionally first quarter results were positive, in-line with the expectation, including a considerable improvement in the key Mexican market. We must not forget that the slow down and a recession in the U.S. economy is indirectly affecting the Mexican economy.

However, the company's geographic diversification is already paying off, since the outlook for Latin America remains promising for the short term. We are particularly encouraged by the continued expansion of the Oxxo chain, the better-than-expected results for Coca-Cola FEMSA (NYSE: KOF) and the positive outlook for the Kaiser brewer in Brazil. All considered we are reiterating our Buy recommendation on FMX, with a P/E multiple 20x on our 2008 earnings estimates. Thus, our target price is $48.25.

JA Solar Remaining Hot

JA Solar Holdings Co. Ltd.'s (Nasdaq: JASO) significant upswing following its February 2007 IPO remains a compelling growth story in clean energy. The growth potential for the solar industry as a whole is very promising. Capacity expansions and committed supply of key raw materials at JA Solar will continue to fuel growth.

Strong earnings growth coupled with a well-diversified customer base make JASO one of the fastest growing alternative energy stocks. Material cost savings through the company's long-term supply agreement will also boost margins. As of the date of this report, JASO trades at a multiple of 26.9x our current-year 2008 earnings per share estimate, or roughly in-line with the median value of its alternative energy industry.

The current multiple is at a significant discount to the average industry multiple and many of its peers. With strong projected year-over-year earnings projections throughout 2009, this discount represents an opportunity for the share price to appreciate significantly with forward P/E multiple expansions.