Zacks Analyst Blog Highlights: PG&E, Con Ed, Schering-Plough, Merck & Co., Inc. and Johnson & Johnson.

Business Wire, June 19, 2009

http://www.profit.zacks.com/

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: PG&E (NYSE: PCG), Con Ed (NYSE: ED), Schering-Plough (NYSE: SGP), Merck & Co., Inc. (NYSE: MRK) and Johnson & Johnson (NYSE: JNJ).

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Here are highlights from Thursday’s Analyst Blog:

States of Distress

Companies with substantial operations in the hardest hit states will face a tougher time than those in relatively unaffected states. One group that tends to have very clear geographic profiles are the Utilities. The poor financial condition of California means that PG&E (NYSE: PCG) faces a substantial headwind, and the same is true for New York and Con Ed (NYSE: ED).

Hold SGP Until the Acquisition

On a stand-alone basis we expect Schering-Plough’s (NYSE: SGP) sales to fall 2% in 2009 due to a significant foreign exchange headwind. Increased competition to prescription Claritin/Clarinex and consumers shifting discretionary spending away from Animal Health and Consumer products will also impact sales growth.

We expect EPS to fall 1% in 2009, a more moderate drop than revenues as operating margins benefit from foreign exchange. Gross margins and SG&A and R&D expenses showed a significant benefit from foreign exchange in the first quarter, helping push up EPS 5% on a revenue decline of 6%.

While we do not expect the same degree of benefit in the remainder of the year, we believe foreign exchange will help widen operating margins by about 250 basis points in 2009 versus 2008 levels. Operating margins will also benefit from cost-containment from the PTI program.

The proposed merger with Merck & Co., Inc. (NYSE: MRK) is currently expected to close in the fourth quarter. We believe it’s in Merck’s best interests to get the deal done, notwithstanding potentially material concessions to Johnson & Johnson (NYSE: JNJ) relative to rights to Remicade and golimumab.

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