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: NTT DoCoMo, Inc. (NYSE:DCM), DRS Technologies, Inc. (NYSE:DRS), Evergreen Solar Inc. (Nasdaq:ESLR), Reinsurance Group of America (NYSE:RGA) and Aon Corp. (NYSE:AOC).
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Here are highlights from Tuesday’s Analyst Blog:
DCM Heading in the Right Direction
We maintain our Buy rating and the same valuation target for NTT DoCoMo, Inc. (NYSE: DCM), the largest wireless service provider in Japan. The company commands approximately 50% of the Japanese cellular market. The introduction of discount-priced service plans progressed as DCM’s customer churn rate improved significantly.
In order to maintain its leadership position, the company launched a sales promotion to popularize its FOMA 905i series handsets, which enable users to access two phone numbers and two e-mail addresses with a single device. DCM upgraded 96% of its total coverage area with 3G HSDPA technology and is consolidating eight regional sales divisions to streamline operating costs, while seeking expansion opportunities outside Japan.
Merger Boost for DRS Tech
With a solid product portfolio, strong order bookings, and a large backlog position complementing revenue and earnings growth potential, DRS Technologies, Inc. (NYSE: DRS) is a leading supplier of defense electronic systems with exposure to the high-growth C4ISR area of the defense budget. Various multi-year contracts, within the defense sector further strengthened the company’s position as a key supplier in the tactical secure communications marketplace.
Looking ahead, the $81 per share acquisition of DRS by Finmeccanica S.p.A. is expected to be completed by year-end 2008. However this limits the upside potential of DRS. Thus, we change our recommendation to Hold on DRS common stock. Price appreciation to our near-term valuation target, coupled with the 3 cents per share quarterly dividend, represents annualized total return potential of 8.6%.
Evergreen is Full of Energy
The growth potential of the solar industry as a whole - and Evergreen Solar Inc. (Nasdaq: ESLR) in particular with a $3 billion contractual backlog - remains a compelling story. Capacity expansion and progress toward near-term break-even earnings make it one of the fastest growing alternative energy stocks.
The positive factors include the newly operational Devens facility, significant new multi-year sales contracts, planned capacity expansions over the next few years, improving operating efficiencies, technological upgrades, and new silicon supply contracts.
RGA on Hold
Reinsurance Group of America (NYSE: RGA) second quarter operating results came in at $1.71 per share, versus $1.31 per share in the year-ago period, as all operating segments contributed to solid earnings, with mortality experience rebounding from the 1Q08 level. We remain cautious with respect to the slight increase in sub-prime mortgage exposure on a linked quarter basis.
Based on 2Q08 results and prior to the 2Q08 conference call, we are preliminarily adjusting our 2008 and 2009 earnings expectations to $6.00 per share and $6.50 per share, respectively, from $5.65 per share and $6.45 previously. The shares of RGA currently trade at 0.99x its adjusted book value of $45.04 per share per share (before the impact of FAS 115a), and 0.91x its reported book value of $49.13 per share.
Aon Limited by Soft P/C Market
Aon Corporation (NYSE: AOC) will release its 2Q08 earnings results after the market closes on July 31, 2008. A conference call is scheduled for the next morning. First-quarter adjusted operating earnings from continuing operations came in at 71 cents per share, a nickel ahead of our estimate, supported by organic revenue growth as well as margin expansion.
We were pleased with the 1Q08 results, as the company was able to grow its top-line as well as the margins, despite unfavorable market conditions. Further, AOC continues to invest heavily in its core businesses, while exiting the non-core segments. The company recently sold Combined and Sterling as part of its strategy to exit its capital intensive insurance underwriting business.
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