Zacks Analyst Blog Highlights: Kimberly-Clark Corp., Primedia, Inc., Lehman Brothers Holdings Inc., American International Group, Inc. and Morgan Stanley

Business Wire, Sept 22, 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 Corp. (NYSE: KMB), Primedia, Inc. (NYSE: PRM), Lehman Brothers Holdings Inc. (OTC: LEHMQ), American International Group, Inc. (NYSE: AIG) and Morgan Stanley (NYSE: MS).

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Here are highlights from Friday's Analyst Blog:

Kimberly-Clark a Value Buy

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

The company exhibited operating margin improvement in the latter half of 2006 and 2007, but rising costs of fiber and pulp are now compressing both the gross margin and operating margin expansion. It has repurchased shares, financed in part by the issuance of debt, in an attempt to achieve EPS growth targets. Nevertheless, the stock is upgraded to a Buy based on valuation.

Primedia Business Stabilizing

The advertising revenue in Primedia, Inc.'s (NYSE: PRM) core Apartment Guide business (68% of the company's second-quarter revenue after the sale of the Enthusiast Media and the Auto Guides businesses) appears to be stabilizing after having fallen for three consecutive quarters as the softening housing market slows condo conversions, and shrinks the business customer base.

Meanwhile, we expect cost-cutting efforts, including the consolidation of Primedia's six NYC offices into one to bolster declining EBITDA. Nevertheless, we expect the slowing economy and battered housing market to turn revenue growth negative in the company's two other businesses, which together generate 32% of its revenue. And we don't foresee a meaningful near-term recovery in weak industrywide ad trends or the company's revenue. We keep our Hold rating on the stock with a six-month target price of $3.25.

Bernanke & Paulson Get Creative

This week has been more volatile than I could have imagined, especially given that we have had three days with intraday Dow moves of 500 points or more.

Traders are reacting quickly to the ever evolving events, which has included the bankruptcy of Lehman (OTC: LEHMQ), the government takeover of AIG (NYSE: AIG), the closing of a Putnam money market fund, an infusion of liquidity by several central banks and a proposal for a massive bailout of financial firms. Not to mention that short-selling has been banned on nearly 800 financial stocks here in the U.S.

At the root of the credit crunch is a psychological problem - lenders don't trust borrowers. The entire financial system is based on the expectation that both parties engaged in a transaction that will meet their obligations. When counter-parties don't trust each other, deals don't get done and loans don't get made. It was a lack of trust that caused Bear Stearns to collapse so quickly, and it is a lack of trust that has created questions about the viability of Morgan Stanley (NYSE: MS) as a stand-alone firm.

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