Zacks Analyst Blog Highlights: Wyeth, Advance Auto Parts, Inc., Du Pont, China Southern Airlines Company Ltd. and Cache, Inc

Business Wire, Sept 29, 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: Wyeth (NYSE: WYE), Advance Auto Parts, Inc. (NYSE: AAP), Du Pont (NYSE: DD), China Southern Airlines Company Ltd. (NYSE: ZNH) and Cache, Inc. (Nasdaq: CACH).

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Here are highlights from Friday's Analyst Blog:

Wyeth Working Thru Setbacks

Wyeth (NYSE: WYE) is one of the world's largest research-driven pharmaceutical and healthcare products companies. The Madison, New Jersey-based company's recent performance has been stunted due to the entry of generic Protonix in late 2007. EPS growth through 2009 will benefit from recently implemented productivity initiatives and share repurchases.

We look for EPS of $3.50 in 2008, flat from 2007 due to expectations of a higher tax rate and an unfavorable interest rate environment relative to 2007. We maintain our Hold rating with a $42 price target, representing 12.0x our 2008 EPS estimate of $3.50.

Advanced Auto a Hold for Now

Advance Auto Parts, Inc. (NYSE: AAP) is a specialty retailer of automotive parts, accessories, and maintenance items. The company caters to the do-it-yourself (DIY) and do-it-for-me (DIFM) customers. Though it is generating top-line growth by opening new stores, the company currently faces a challenging industry environment.

To combat the difficult industry metrics, the company has reviewed its business strategies to drive sales, lower costs and increase return on invested capital (ROIC). AAP expects increased investments and fuel costs to constrain profit growth in 2008.

Du Pont Suffers from Hurricane

Du Pont (NYSE: DD) is currently the world's second largest chemical company in terms of market capitalization and the fourth in revenue. Du Pont describes itself as a global science company employing more than 60,000 people worldwide with a diverse array of product offerings.

Earnings growth may find some pressure from higher expected operating expenses to support growth. Selling, general and administrative expenses are expected to increase in the future to support the company's expanding business. We believe the stock is fairly valued at roughly 59x our 2008 EPS estimate, or at roughly a 1.5x P/E/G on 2008 EPS. Our price target moves to $291.

China Southern in Holding Pattern

We are maintaining our Hold on China Southern Airlines Company Ltd. (NYSE: ZNH), but cutting our target price to $10. It is China's largest carrier by fleet size, and headquartered in Guangzhou, China. China Southern, together with its subsidiaries, engages in the airline operations in China and internationally.

As China's largest carrier, China Southern is well positioned to leverage the growth potential of aviation industry in China. We think its current price fairly reflects most factors. The company pays no dividend.

Cache Guidance Lowered

Cache, Inc. (Nasdaq: CACH) is a specialty retailer, which operates stores selling women's apparel and accessories under the names Cache and Cache Luxe. Cache targets women between the ages 25 and 45. Cache Luxe is the company's newest store concept that was rolled out to replace the Lillie Store concept. The company recently decided to close its Lillie Rubin stores by the end of the third quarter.

The stock is now down about 50% since our downgrade on June 9. Admittedly, we are surprised at how far CACH shares have declined in price, especially in the last few days. Given the difficult environment for retailers, we are hard-pressed to find reasons to step up and buy CACH shares here. We maintain our Hold rating.

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