FactSet Relies on Banking Industry
FactSet Research Systems, Inc. (FDS) is a leading provider of global online integrated data-related products and services for the investment community (primarily bankers, investment managers and brokerage firms). The company combines information from more than 200 databases into its online service and provides tools to download and customize data for investment and portfolio analysis. FactSet generates revenue on a monthly subscription basis from its clients.
FDS continues to demonstrate healthy growth as it expands internationally and enhances its offerings through strategic acquisitions. The company's flagship offering, Portfolio Manager Workstation (PMW) is a staple among asset managers. However, increasing competition from companies like S&P (MHP)'and a challenging environment for investment banks are likely to pressure the top-line in 2009.
Moreover, we remain cautious of FactSet's bookings, given large losses at major financial institutions. We therefore maintain our Hold recommendation on the stock and have cut our six-month target price to $55.50.
Dean Foods Buying Opportunity
Management at Dean Foods (DF) has taken definitive actions to improve shareholder value from the spin-off of TreeHouse Foods in 2005 to a $15 per share special dividend in 2007. Management has focused on the branded products business, reduced SKUs (stock-keeping units), and integrated strategic acquisitions in the Dairy Group.
However, 2007 and 2008 have been challenging due to increased dairy costs. Though costs are expected to remain volatile in 2008, the decline in the stock's price has provided a buying opportunity, since any relief from high dairy costs will dramatically accelerate earnings growth. The Buy rating is maintained.
Despite the increased debt-to-capitalization ratio from the decision to spin-off TreeHouse Foods without any debt (along with the additional debt incurred to pay a $15 special dividend), management's actions should create a faster growing, higher margin company once the higher dairy costs abate. The six-month target price of $27.25 is based on a 22 P/E multiple on this year's (still depressed) earnings estimate.
Jabil Circuit to Trade In-Line
Headquartered in St. Petersburg, Florida, Jabil Circuit, Inc. ( JBL) is one of the largest global suppliers of electronic manufacturing services (EMS) used in communication products, computer peripherals and automobile industries. Revenue for the most recent quarter was $3,264.9 million, an increase of 4.3% from $3,129.8 million reported in the year-ago quarter. This was in line with the company's guidance of $3.2 billion to $3.3 billion range. GAAP EPS in the quarter was $0.28 versus $0.06 in the comparable quarter last year.
For the first quarter of fiscal 2009, Jabil expects revenue in the range of $3.40 billion to $3.60 billion, with an estimated core operating margin range of 3.0% to 3.4%. Core EPS is anticipated to be in a range of $0.30 to $0.38 range.
