Smith & Nephew Valuation Full

A Hold recommendation has recently been issued to medical products company Smith & Nephew, Plc (SNN) by Zacks senior healthcare industry analyst Duong Vuong, CFA. Here's what his latest update said:

'We are maintaining a Hold recommendation on SNN after the company's third quarter results. Third quarter sales growth of 10% was similar that for the whole of last year (8%) and well below Q2 sales growth of 19%. We think valuation is full, given the 2007 P/E of 22 and our earnings growth rate estimate of 10%, giving it a PEG of 2.2.

'The company said that despite market pressures in some areas, the third quarter has seen continued good revenue growth across the business, through its innovative product portfolio and the increased effectiveness of its sales force. The company believes that its focus on the high growth segments is bearing fruit and generating profitable growth.

'SNN reported Q3 results with trading profit increased by 19 percent to US$169 million. Revenue rose 10 percent to $845 million. The company benefited from rising demand for hip replacements and keyhole surgery products, and as recently acquired businesses also contributed to earnings. Smith & Nephew bought Plus Orthopedics Holding AG in May for $887 million and BlueSky Medical Group Inc. in the same month for $95 million.

'The stock is currently trading at 22x our 2007 EPADS estimate. We feel this is full, given our projected growth rate of 10% in EPADS over the next five years, and a P/E-to-growth rate (PEG) ratio of 2.2x. However, we note that a better gauge for investors would be sales growth, as we think the stock will react more to sales growth than to EPADS growth.'

AXA Group Trades Beyond Peers

An update has just come out today on AXA Group S.A. (AXA), in which senior insurance sector analyst Duong Vuong, CFA is restating his Hold rating on the company. We excerpted the following details:

'Most business units are performing well, and AXA is expected to continue its momentum in 2008. However, compared to its peers, AXA is fairly valued. On December 24, 2007 AXA entered the Russian market by agreeing to purchase 36.7% of Reso Garantia for 810 million euro ($1.16 billion). Reso Garantia was Russia's No. 2 insurance provider in the first half, with 7% of the market, 6,000 employees and 18,000 agents.

'The Russian company, which is particularly focused on insuring vehicle owners against damage and third-party liability, reported first-half 2007 net income of 41 million euro ($59 million) on revenue of 446 million euro ($639 million). Axa has call options exercisable in 2010 and 2011 to buy the remaining stake. AXA reported H1 results with net income up 16% to 3.2 billion euro ($4.4 billion), up 10% on a comparable basis (adjusted for divestures and acquisitions).

'Life and savings new business volume was up 11% on a comparable basis and property and casualty revenues up 4% on a comparable basis. Asset management revenues were also strong, up 22% on a comparable basis. The stock is currently trading at 11x our 2007 EPS estimate, which is higher than its closest peers. As such our recommendation is Hold and our six-month target price is $41.'

TAP to Perform In-Line

A Hold recommendation has recently been issued to beverages company Molson Coors Brewing Company (TAP) by Zacks senior consumer products analyst Steven Ralston, CFA.  Here's what his latest update said:

'Molson Coors Brewing Company, formed through the 2005 merger between Molson and Adolph Coors, has greater scale and financial strength so that the company can better compete with the dominant brewer in the U.S. Though a few disappointing earnings reports caused a dramatic decline in the stock's price, a subsequent positive earnings surprise in the first quarter of 2007 lifted the stock.

'In addition, unfavorable pricing in both the on-premise and off-premise channels contributed to the sales decline. In 2007, European beer volume declined 1.7%, 7.5%, and 6.9% in the first, second, and third quarters, respectively. Europe continues to be a difficult business environment since smoking bans have been implemented in 2007 with further bans coming in the first half of 2008. Management expects European results to be weak in 2007.

'Higher commodity costs, especially fuel and raw material prices, are also dampening profitability. Cost pressures from increased freight rates along with rising packaging material prices are impeding significant margin expansion. Recently, the announcement of a joint venture with SABMiller Plc (SBMRY) propelled the stock to a high valuation level.

'Molson Coors predecessor stock, Adolph Coors, traded in a P/E multiple range of 10 to 27 over the last six years. At the current P/E of 18.9, we do not expect the stock to outperform until European operations improve. The target price of $55.00 represents a 20.5 P/E multiple on trailing 12-month earnings. Hence, the Hold rating is maintained.'

Adjusted Target on XLNX Shares

Zacks semiconductor analyst Abdul Saleh says that it is a very good investment opportunity for long-term investors to purchase shares of chipmaker Xilinx, Inc. (XLNX):

'Xilinx reported its fiscal Q2:08 results on October 18, 2007.