Zacks Analyst Blog Highlights: Potash Corp., California Pizza Kitchen, Inc., Kraft Foods Inc., DTS Inc. and Snap-on, Inc

Business Wire, Sept 3, 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: Potash Corp. (NYSE: POT), California Pizza Kitchen, Inc. (Nasdaq: CPKI), Kraft Foods Inc. (NYSE: KFT), DTS Inc. (Nasdaq: DTSI) and Snap-on, Inc. (NYSE: SNA).

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Here are highlights from Tuesday's Analyst Blog:

Potash Still Considered Buyable

Potash Corp. (NYSE: POT) has leverage in higher fertilizer application rates, higher crop plantings, increasing demand for biofuels and rising crop prices. The company is located in low cost areas and its financials are solid. Hence, we rate the stock a Buy with a target price of $250. This is 18.9x our 2008 estimate.

Potash Corporation enjoys significant cost advantage with regard to raw materials. All potash produced by the company in Saskatchewan is in the area, where extensive potash deposits are found. Moreover, the company has lower cost nitrogen operations in Trinidad due to the long-term, lower-cost gas contracts with Natural Gas Company of Trinidad and Tobago Limited as well as a proximity to the U.S. market.

Calif Pizza Kitchen Still a Hold

We expect California Pizza Kitchen, Inc. (Nasdaq: CPKI) to continue suffering declining traffic, deleveraging of its rent expense, and shrinking return on equity throughout 2008. Traffic should stabilize in 2009, but we don't expect a rebound unless the economy improves substantially and there is little visibility to an improvement in gas prices and real estate values.

Nevertheless, coming off a weak 2008, we think the company can likely reinvigorate earnings primarily through unit growth. We expect it to grow earnings at a mid-teens average rate over the next five years by adding full service restaurants in existing and new markets, increasing comps and restaurant margins through its new prototype restaurant design, further penetrating the fast casual market with the new ASAP concept, repurchasing shares, and building its lucrative Kraft (NYSE: KFT) frozen pizza licensing business.

DTS Premium Up Too High

Increasing demand for DTS, Inc.'s (Nasdaq: DTSI) technologies in emerging applications such as cars and PCs augur well for the company's earnings growth. The company is also diversifying its business in the virtual audio technology and broadcast market, and is enhancing the use of DTS technology in standard definition applications, which we believe will drive revenue growth in 2009 and beyond.

Moreover, with the completion of the sale of its Digital Cinema business, DTS should be able to concentrate on the Consumer business and benefit from the anticipated acceleration of the high definition cycle. Nevertheless, we think valuation multiple expansion is unjustified, given the risks posed by a worse-than-expected consumer-led economic slowdown, and rate the stock a Sell.

Snap-on at a Very Nice Price

Snap-on, Inc. (NYSE: SNA) has reported upside earnings surprises for ten consecutive quarters, which has caught the attention of earnings momentum investors. The management has successfully delivered more predictable and consistent financial performance through the implementation of the Driven to Deliver and Rapid Continuous Improvement programs. With the stock's pull-back to the low-$50s, its valuation compels us to recommend a Buy rating.

Through a structured approach of supply chain and franchise improvement initiatives, order-fill rates are improving and profitability is increasing across all operating segments except the Tools Group. The acquisition of ProQuest Business Solutions has added value for global original equipment manufacturers (OEM) and enhanced the productivity and profitability of their dealerships.

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