Zacks Bull and Bear of the Day Highlights: PetMed Express, Salix Pharmaceuticals, Brasil Telecom, Campbell Soup and HDFC Bank

Business Wire, Oct 22, 2008

CHICAGO -- Zacks Equity Research highlights PetMed Express (Nasdaq: PETS) as the Bull of the Day and Salix Pharmaceuticals (Nasdaq: SLXP) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Brasil Telecom (NYSE: BRP), Campbell Soup (NYSE: CPB) and HDFC Bank (NYSE: HDB).

Full analysis of all these stocks is available at http://at.zacks.com/?id=2676.

Here is a synopsis of all five stocks:

Bull of the Day: PetMed Express (Nasdaq: PETS)

PetMed Express and subsidiaries, doing business as 1-800-PetMeds, is a leading nationwide pet pharmacy. The company markets its health products for dogs, cats, and horses direct to the consumer through national television, online, and direct mail advertising campaigns.

On October 20, PetMed Express delivered another strong quarter that was above expectations and our estimates. The company's sales trends remain strong, despite the difficult economic environment. What's more, the company's healthy repeat customer business has allowed management to cut operating expenses without hurting its overall sales growth. As a result, the company has posted impressive profit margin gains.

Going forward, we think the company can increase its operating profit margin to 15.3% in 2009 and 15.7% in 2010, up from 13.7% in fiscal 2007. All told, we are becoming more bullish on PetMed Express and upgrading the stock from Hold to Buy. Our target price is $20, or about 20x our fiscal 2009 EPS estimate.

Bear of the Day: Salix Pharmaceuticals (Nasdaq: SLXP)

Salix Pharmaceuticals is focused on drugs used in the treatment of a variety of gastrointestinal diseases. The company is facing difficult times thanks to the FDA's approval to three generic versions of lead product, Colazal. As such, we expect 2008 to be an extremely challenging year for the company, with a significant decline in top-line growth. Moreover, we expect the company to post a loss in 2008 and 2009.

We believe that the main potential for the company lies with the approval of additional indications for Xifaxan, particularly the irritable bowel syndrome [IBS] indication. However, we were disappointed to hear that Salix expects to file the NDA [new drug application] for the IBS indication in mid-2010, a significant delay from the previously announced timeline of late 2008 / early 2009.

While new product approvals should help restore investor confidence, the possibility of a patent challenge for Xifaxan will remain an overhang on the shares in the coming quarters. While new product launches and new indications for Xifaxan should support a recovery in revenues in 2009, we do not expect earnings to recover prior to 2010. We maintain a Sell rating with a target price of $5.

Latest Posts on the Zacks Analyst Blog:

Brasil Telecom (NYSE: BRP)

We are keeping our current Buy recommendation on Brasil Telecom. Though the company posted lower-than-expected results in the third quarter of 2008, the short-term outlook remains positive. The company also has solid cash flow, decent operating margins, and a very attractive valuation.

Additionally, the growth in the wireless and the broadband segments are encouraging and should continue in future quarters. Moreover, the merger with TNE and the voluntary public tender offer creates a positive environment for the stock in the very short term.

Campbell Soup (NYSE: CPB)

Campbell Soup and its Transformation and Driving Quality Growth plans are improving the top-line through a combination of improved products, attractive packaging, a new retail shelving system, and more effective marketing. Price increases and a line of lower sodium soups helped Campbell Soup accomplish management's financial goals in the last two fiscal years.

Management continues to optimize the portfolio with the introduction and reformulation of lower sodium soups. However, rising cost inflation and flat sales in the high margin condensed soup business are concerns. The Hold recommendation is maintained.

HDFC Bank (NYSE: HDB)

We are continuing our Hold on HDFC Bank Limited, or HDFC, but reducing our target price to $70. HDFC posted 2009 fiscal second quarter (September 30) earnings of Rs5,280 million, up 43% from last year, but below our estimate due to higher-than-expected expense growth. We are cutting our fiscal year (March 31) EPADS estimates to $3.50 from $3.80 for 2009 and to $4.50 from $5.15 for 2010, in part due to changes in FX assumptions given recent strengthening of the US$ against the India Rs.

Results should continue to reflect strong loan growth and margin improvement, aided by the pooling-of-interests merger with Centurion Bank of Punjab Limited (with Rs254 billion in assets) at a rate of one HDFC share for 29 shares of Centurion Bank. A partial offset is higher compensation expense, as the company expands its branch network. HDFC increased the annual dividend by 21%.

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