Zacks Analyst Blog Highlights: Kroger Co., XenoPort, Inc., GlaxoSmithKline Plc., Ltd., Standard Motor Products, Inc. and Vital Images, Inc

Business Wire, Sept 19, 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: Kroger Co. (NYSE: KR), XenoPort, Inc. (Nasdaq: XNPT), GlaxoSmithKline Plc. (NYSE: GSK), Standard Motor Products, Inc. (NYSE: SMP) and Vital Images, Inc. (Nasdaq: VTAL).

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Here are highlights from Thursday's Analyst Blog:

Kroger Sees Margins Contract

Kroger Co. (NYSE: KR) reported better-than-expected results for the second quarter of fiscal 2008. Sales were $423 above consensus estimates, while its EPS were $0.01 ahead of the consensus. Despite the strong second quarter results, Kroger maintained its full-year EPS guidance of $1.85-$1.90. We are increasing our sales and earnings estimates to reflect the upside in the second quarter.

The combination of company's low prices and private-label brands are leading to market share gains and driving the company's results. Still, we remain concerned with Kroger's contracting gross margins and higher food prices that could cause consumers to trade down from Kroger stores. The stock looks fairly valued at current levels. We maintain our Hold rating.

XenoPort Near Attractive Levels

XenoPort, Inc.'s (Nasdaq: XNPT) lead candidate is Solzira (XP-13512), a Transported Prodrug of gabapentin. XenoPort is partnered with GlaxoSmithKline (NYSE: GSK) for development and commercialization in the U.S. and select countries outside the U.S. The drug has completed late-stage trials for the treatment of Restless Legs Syndrome. The data has been highly encouraging. XP-13512 could launch in the third quarter of 2009.

Our current rating is Hold with a $52 target. We think the company can earn $1.46 in 2011 and potentially $2.63 in EPS in 2012. We feel that $52, a market capitalization of $1.3 billion, is a fair value for the current fundamentals. We would be buyers of the stock on additional weakness.

Standard Motor Goes to Mexico

Standard Motor Products, Inc. (NYSE: SMP) enjoys strong brand recognition and a less cyclical end-market within the auto and auto parts industry. Moreover, SMP expects to benefit from the shifting of its production facilities to Reynosa, Mexico due to lower labor costs.

However, slow growth, weak pricing in the company's key businesses and higher gasoline and metal prices are serious matters of concern. Further, the company's Temperature Control segment is facing strong competition from Chinese imports. Thus, we rate shares of SMP a Hold with a target price of $5.50.

Vital Images Looks Longer Term

Vital Images, Inc. (Nasdaq: VTAL) develops medical software for use primarily in clinical diagnosis, disease screening and therapy planning. The company's software applies proprietary computer graphics and image processing technologies to a wide variety of data supplied by computed tomography (CT), magnetic resonance (MR), and positron emission tomography (PET) scanners.

The company's sound cash position is being utilized for stock repurchases and may lead to an acquisition over the long-term. We believe VTAL is appropriately valued at roughly a group premium of 3.3x 2009 revenue estimate. Our price target moves to $17.50, and our Hold rating is maintained.

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