Kinross Acquisition Questions

Zacks senior mining industry analyst Paul Raman, CFA has remained neutral and reiterated his Hold rating on mining giant Kinross Gold Corporation (KGC). We bring you some selected details from his latest report:

'Higher gold prices bode well for Kinross' top-line growth. The Bema acquisition will result in various synergies. KGC has received approval for a huge investment in the Paracatu mine expansion, which is expected to start in 2008. The various exploration and expansion activities undertaken will enhance production levels.

'However, declining production levels at some of the existing operations and higher mining, energy and administrative overhead costs are likely to constrain margin expansion. Currently, the shares of KGC are trading at 49.7x our 2007 EPS estimate of $0.37. Kinross continues to benefit from higher spot gold prices. The company is also expected to gain from various exploration and acquisition activities.

'The Bema acquisition will help boost future growth. However, the company's earnings volatility, higher energy costs and falling reserves base lead us to rate the stock a Hold. There are also some uncertainties regarding how well both Bema and KGC will integrate. Consequently, we reiterate our Hold recommendation on shares of KGC with a six-month target price of $16.50.'

Headwinds for Headwaters

A Hold recommendation has recently been issued to construction material manufacturer and alternative energy company Headwaters, Inc. (HW) by Zacks construction sector analyst Mario Ricchio. Here's what his latest update had to say:

'Headwaters, Inc. reported fourth quarter EPS of $0.59, slightly above our expectations of $0.58, amid higher sales across all divisions and a year-over-year margin increase in both the coal combustion products (CCP) and construction material segments. Increasing acceptance of fly ash by concrete producers and past acquisitions will continue to support profitability. However, sales of the construction materials division remain vulnerable to the ongoing weakness in the residential housing market.

'Currently, the shares of Headwaters are trading at 9.6x our FY08 earnings estimate of $1.26 per share. In the past, the company's earnings benefited from acquisitions and a strong demand for its fly ash and construction materials products. Almost 70% of revenue is tied to the building materials business while the remainder heavily tied to Section 45K (formerly Section 29) tax credits. Over the next couple of quarters, Headwaters earnings are at risk due to the downturn in residential construction activity and the likely phase out of Section 45K tax credits.

'Once our earnings visibility improves with regard to the company s heavy oil upgrading and coal liquefaction technologies, we believe the P/E multiple can expand to a much higher level. Therefore, we are taking a cautious approach in valuing Headwaters at the current time. Hence, we reiterate our Hold recommendation on shares of HW. We maintain our target price at $12.25 per share, which equates to a P/E multiple of around 9.7x our FY08 EPS estimate.'

Neutral for Qiagen

The following excerpts give us an idea as to why Zacks senior life sciences industry analyst Grant Zeng, CFA revises the price target but remains neutral on Qiagen N.V. (QGEN), the pharmaceutical company:

'Qiagen N.V. produces and distributes biotechnology products and services primarily for separating and purifying nucleic acids (DNA/RNA). The company, through its subsidiaries in Europe, Asia, Australia, Canada and the U.S., operates in the life sciences industry with a portfolio of more than 500 products and automated solutions. Though the molecular diagnostic and research market offers enormous growth, the company faces stiff competition.

'Fiscals 2005 and 2006 were eventful years with the company entering into several acquisitions and partnerships which should help drive growth in 2008 and beyond. The company continues to remain aggressive on the acquisition front. The most significant deal closed by the company in July 2007, is the acquisition of Digene Corp., which should boost the top-line going forward. We believe the company will continue entering into strategic partnerships and alliances going forward.

'We are optimistic on a number of new research products and potential breakthrough procedures for fractionation of proteins using Qiagen's new product offerings.