India-based INFY Outperforms

Zacks information technology analyst Abdul Saleh rates a Hold to software solutions firm Infosys Technologies Ltd. INFY) in his latest report. Here we find out why:

'INFY reported stronger-than-expected revenues and earnings for 3Q08. It continues to strengthen strategic alliances and reorganize businesses in order to counter the effects of a strong rupee. The company was able to improve operating margins in the third quarter despite a higher attrition rate, higher wages and appreciation of the rupee, which were likely to pressure margins in the quarter.

'These effects were offset by SG&A cost savings and a slew of tax and provision reversals. We have slightly raised our 2008 revenue estimates to the higher end of the guidance range, although wages, currency and attrition remain our major concerns.

'The company has declined to forecast its FY09 revenues at this point and accordingly we have adjusted our model to reflect a year-over-year revenue growth rate of 28% for FY09 compared to expected growth rate of 35% for FY08. We believe that Infosys will be able to maintain or improve margins going forward as it has done in the just-concluded quarter. The recent reorganization of businesses with a dedicated India focus as well as enhancement of relationship with Microsoft will enable the company to capture hitherto unaddressed market opportunities going forward.

'However, our 2009 estimates call for a slower earnings growth of 15.3% over 2008 estimates. We continue to believe that INFY may trade at a lower P/E than its historical average and have fixed a price target of $42, or between 17.5x and 18.5x our 2009 EPADS estimate over the next six months. We continue to rate INFY a Hold and are concerned about the short-term pressures the company is facing.'

CRTX Not As Risky

A Buy rating has recently been issued to biopharmaceutical company Critical Therapeutics, Inc. (CRTX) by Zacks senior pharmaceutical industry analyst Grant Zeng, CFA. Here's what his report said:

'Critical Therapeutics, Inc. is a biopharmaceutical company focused on the discovery, development, and commercialization of products for respiratory, inflammatory, and critical care diseases. The company has two products, Zyflo and Zyflo CR for asthma, on the market. With the completion of the restructuring and the signing of co-promotion agreement with Dey LP, we believe both top-line and bottom-line will improve in the coming quarters.

'The stock offers less risk than similarly sized biotechnology companies due to the recent approval and launch of its leading product Zyflo/Zyflo CR. Although initial ramp has been slow for Zyflo, we believe sales will pick up in the next few quarters due to the launch of Zyflo CR.