- JP Morgan comments on Hewitt Associates (NYSE:HEW) saying they think it is too early to buy the stock despite the recent sell-off (down 24% YTD vs. SandP500 flat). The overhang from the BPO portfolio problems and recent mgmt change announcements outweigh a seemingly attractive FCF profile. Firm is lowering estimates to be well below consensus.
While tempting to look at HEW in three parts (consulting, benefits, BPO), they think it's more appropriate in two (consulting, outsourcing). In firm's view, the implied outsourcing P/E multiple of about 23-25x at the current price, is not cheap.
Maintains Neutral rating as the intrinsic value is probably higher than the current stock price; however, with sentiment low and limited positive catalysts near term, they think out-performance remains in the future.
Notablecalls: Not actionable but good to know category.
- Merrill Lynch notes Sepracor (NASDAQ:SEPR) has traded up recently based in part on increased speculation that the company could be acquired. In firm's view, the recent FDA rejection of NBIX's indiplon tablets (a potential competitor to Lunesta) and PFE's decision to return indiplon rights to NBIX makes a takeout more possible. That said, they believe the stock could pull back if a deal is not announced in the near term. Has Buy rating and $62 target on SEPR as standalone.
Notablecalls: Not actionable but good to know category.
- Bear Stearns comments on Phelps Dodge (NYSE:PD) after the co announced itsintention to buy Inco and Falconbridge in a deal that would create a $56 billion global mining giant. The combined entity would be the #1 producer of nickel, the #2 producer of copper, the #2 producer of molybdenum, the #3 producer of cobalt and a significant producer of zinc. Believes the $900 million in identified synergies should be achievable, and may prove to be conservative.
According to the firm it appears that PD is using its undervalued equity to purchase two companies that are fully valued. While they believe that this deal may prove to be a positive over the long term, PD shares may come under some selling pressure until this deal is resolved. Maintains Outperform on PD.
Notablecalls: Not actionable but good to know category.
While tempting to look at HEW in three parts (consulting, benefits, BPO), they think it's more appropriate in two (consulting, outsourcing). In firm's view, the implied outsourcing P/E multiple of about 23-25x at the current price, is not cheap.
Maintains Neutral rating as the intrinsic value is probably higher than the current stock price; however, with sentiment low and limited positive catalysts near term, they think out-performance remains in the future.
Notablecalls: Not actionable but good to know category.
- Merrill Lynch notes Sepracor (NASDAQ:SEPR) has traded up recently based in part on increased speculation that the company could be acquired. In firm's view, the recent FDA rejection of NBIX's indiplon tablets (a potential competitor to Lunesta) and PFE's decision to return indiplon rights to NBIX makes a takeout more possible. That said, they believe the stock could pull back if a deal is not announced in the near term. Has Buy rating and $62 target on SEPR as standalone.
Notablecalls: Not actionable but good to know category.
- Bear Stearns comments on Phelps Dodge (NYSE:PD) after the co announced itsintention to buy Inco and Falconbridge in a deal that would create a $56 billion global mining giant. The combined entity would be the #1 producer of nickel, the #2 producer of copper, the #2 producer of molybdenum, the #3 producer of cobalt and a significant producer of zinc. Believes the $900 million in identified synergies should be achievable, and may prove to be conservative.
According to the firm it appears that PD is using its undervalued equity to purchase two companies that are fully valued. While they believe that this deal may prove to be a positive over the long term, PD shares may come under some selling pressure until this deal is resolved. Maintains Outperform on PD.
Notablecalls: Not actionable but good to know category.
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