Zacks Bull and Bear of the Day Highlights: Safeway, Inc., Red Robin Gourmet Burgers, Celgene Corp., Cirrus Logic and PACCAR

Business Wire, Oct 9, 2008

CHICAGO -- Zacks Equity Research highlights Safeway, Inc. (NYSE: SWY) as the Bull of the Day and Red Robin Gourmet Burgers (Nasdaq: RRGB) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Celgene Corporation (Nasdaq: CELG), Cirrus Logic (Nasdaq: CRUS) and PACCAR, Inc. (Nasdaq: PCAR).

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: Safeway, Inc. (NYSE: SWY)

We are upgrading Safeway, a major food and drug retailer in North America, shares from Hold to Buy. The recent sell-off in its shares has created a buying opportunity, in our view.

Despite business going pretty much as expected, SWY shares are down 19% in the last two months and 30% in the last year. Safeway shares have sold off because of risks associated with the difficult macro-environment that has consumers trading down to cheaper alternatives, as well as the credit crisis that has impacted the entire stock market.

In our view, SWY shares have declined to a level that is attractive on a valuation basis, even if a weak macro-environment persists throughout 2009. As a result, our six-month target price is $28, or about 11.5x our 2009 EPS estimate.

Bear of the Day: Red Robin Gourmet Burgers (Nasdaq: RRGB)

Red Robin is a casual dining restaurant chain that serves burgers (52% of food sales in 2007) made from beef, turkey, chicken, veggie patties, fish, pork or pot roast as well as salads, sandwiches and other entrees. At the end of 2007, the company owned and operated 249 restaurants and franchised 135.

Despite the 26.2% drop in RRGB's share price since we downgraded the shares to Sell on August 18 (versus an 18.6% drop in the S&P500), we believe the stock will continue to under-perform both the larger market and the restaurant industry. Red Robin's traffic began declining long before the onset of rising gas prices in October 2007 began choking business in the casual dining sector.

Moreover, 2009 consensus EPS estimates are 12% higher than ours, and we think our estimate may prove aggressive if the economic slowdown is deeper or more protracted than we currently anticipate. Although RRGB shares appear cheap relative to its peers, we think there is more downside price potential if the company misses consensus EPS estimates.

Latest Posts on the Zacks Analyst Blog:

Celgene Corporation (Nasdaq: CELG)

Celgene is a fully integrated biotechnology company focused on discovery, development and commercialization of drugs in the area of cancer and immune/inflammatory diseases. The acquisition of Pharmion brings three medically meaningful products -- Thalomid, Revlimid and Vidaza -- into market for hematology and oncology, which will drive growth in 2008 and beyond.

However, we are concerned about the tough competition from Velcade and other products for MDS and MM. Label expansion on Revlimid and Vidaza into other hematological cancers should offer upside for Celgene.

Cirrus Logic (Nasdaq: CRUS)

Cirrus Logic's Industrial Division has a significant component of very profitable revenue from oil exploration companies. The company's oil-based revenue depends more on exploration activity than on oil production. Crude oil prices have decline significantly from their high. However, this may not last as the balance of supply and demand is in close balance.

Our recommendation remains a BUY but given the current stock market valuation and the uncertain economic environment, we have reduced our target price from $8 to $6.50 a share. Based on a P/E ratio of 20, our estimate of the growth in EPS of 20% and our $0.33 estimate of 2009 earnings, our price target is $6.50.

PACCAR, Inc. (Nasdaq: PCAR)

PACCAR is a designer, manufacturer and customer support provider of premium light-, medium- and heavy-duty trucks. The company is benefiting from rising prices and increasing market share, along with strong growth in Mexico and Australia.

However, a strong Class 8 market downturn in the US leads us to rate the stock a Hold with a target of $35.00. PACCAR is the third-largest manufacturer of Class 6-8 heavy-duty trucks (with capacity of more than 15 metric tons) in the world after Volvo and Daimler.

The company also provides customer support for its products with the supply of aftermarket parts, finance and leasing services. Currently, the stock is valued at 10.2x our 2008 earnings of $3.26. Its $35 target price is 10.7x our 2008 earnings estimate.

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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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