Friday, June 30, 2006

Calls of Note Part 2

- Baird views Cephalon (NASDAQ:CEPH)'s announcement of an approvable letter for Fentora (FEBT) as a significant positive for two important reasons: First, it demonstrates that Fentora is approvable and has a clear path to approval, critical because CEPH must replace Actiq before it faces generic competition later in 2006. Second, because final approval is pushed back by 3+ months, it allows CEPH to maximize the harvest of Actiq revenues before triggering the start of generic competition.

Recall Fentora is the successor product to Actiq and that Barr Labs is permitted by contract to launch a generic Actiq on 12/06/06, or upon approval of Fentora (i.e., approval of Fentora automatically triggers earlier entry of Barr's generic Actiq). Maintains Outperform and $75 tgt.

Notablecalls: Not actionable but good to know category.

- Citigroup says Avon Products (NYSE:AVP) remains firm's Top Pick in the HPC space. With the stock having come under pressure over the last month (attributable they believe to not only general market malaise but also growing investor concerns that weakness in emerging markets could pressure Avon's growth in coming quarters), the firm believes the stock again represents a terrific value for investors. Indeed, with Avon trading at roughly 16x 2007 EPS estimate, which they think has considerable room for upside, Avon is now one of the cheaper names in the HPC group (with PG at 17x, CL at 19x, CLX at 18x, and EL at 17x).

Given their belief that the combination of top line growth, margin expansion, and the contribution from either a share buyback or debt repayment will drive healthy double digit earnings growth in 2007, they believe the stock is undervalued. Reiterates Buy rating and $36 price target.

Notablecalls: One to watch today. May have some upside in it.

- Stifel Nicolaus & Co expects shares of several beverage companies to trade up on earnings releases in coming weeks. Contributing factors are mostly reasonable valuations, by firm's estimates, and expected earnings upside versus Street consensus (COT, BUD, TAP). In-line to better than expected beer revenues and increasing commodity cost relief are expected to be major contributors to anticipated earnings and trading upside. U.S. beer shipments and pricing expected to produce upside for BUD.

Notablecalls: Charts of COT and BUD look OK.

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