Early in Cycle for USM

An update has just come out today on U.S. Cellular (USM), in which senior telecom industry analyst David Weissman, CFA is restating his Hold rating on the company. We excerpted the following details:

'U.S. Cellular is the sixth largest wireless telecom operator in the U.S. and the largest subsidiary of Telephone and Data Systems (TDI). Although the competitive environment has intensified following recent consolidation in the wireless industry, U.S. Cellular's high service standards have helped it to maintain steady growth of subscribers and keep churn (customer switching) rates low.

'The stock has appreciated to a 52-week high in anticipation of the planned stock program.  Financial reporting delays and the recent valuation level for its share price have intensified the risk associated with the current valuation. However, management issued a positive outlook for the remainder of 2007. U.S. Cellular trades at 24.1x our 2008 EPS estimate, which represents a significant premium to the forward P/E ratio for the S&P 500 and near to the industry group (other select domestic wireless carriers).

'We believe the high P/E ratio reflects the investors belief that U.S. Cellular is still in the early stages of a growth cycle. On the basis of Enterprise Value (EV) to EBITDA (a common valuation metric for wireless carriers), the stock is trading at 6.6x estimated 2007 EBITDA which is at a discount to the industry average.

'While U.S. Cellular has respectable long-term growth prospects, the stock has historically traded at a discount to the wireless group partly based on technical factors, such as the smaller number of publicly traded shares and the low average daily volume. We maintain our Hold rating while we await and assess subscriber retention trends moving forward. We set a price target of $91 based on P/E multiple of 26x the 2008 EPS.'

Near-Term, BHE a Hold

Zacks senior manufacturing sector analyst Steve Biggs, CFA continues to maintain his Hold rating on the shares of electronic components manufacturer Benchmark Electronics, Inc. (BHE) after a few tweaks here and there. The following excerpts are from his latest report:

'Despite mixed signals in the high-end computing segment, regulatory headwinds in the medical segment, and some softness in the test & instrumentation segment, Benchmark Electronics, Inc. should make progress with new programs in the fourth quarter. As such, we expect the ramping of new programs to improve BHE's revenue run rate in 2008.

'Weak demand and slower product and program transitions has hurt Benchmark's revenue base in the third quarter of fiscal 2007. Shares of Benchmark are currently trading at 9.5x our 2008 EPS estimate of $1.66, a discount to the industry.