Staying with a Buy on BASF Shares

Zacks senior chemical industry analyst Paul Raman, CFA has maintained his Buy rating to Ludwigshafen, Germany-based chemical giant BASF Aktiengesellschaft (BASFY) in his latest report on the company. We excerpted the following details:

'BASF is witnessing sales and earnings growth due to better end-markets. All segments are experiencing improvements, with the chemicals segment emerging as the primary growth driver. Further, strong volumes and better prices are resulting in market share gains worldwide. The company also remains on track to complete its cost-reduction program. BASF is witnessing increased demand across all product lines. The company has so far been successful in passing on rising commodity costs to consumers through price hikes.

'Management is keen to restructure and reorganize the product portfolio, which will lead to significant savings. BASF is expanding its presence in Asia, which is likely to be the key driver of its long-term growth. Various acquisitions like Engelhard Corp., Degussa Chemicals and Johnson Polymers have strengthened BASF's product portfolio. In 2008, the effective income tax rate will be tapered to 30% from 39%. A lower tax liability is expected to boost net profits of BASF.

'Currently, the BASF stock is trading at approximately 12.3x our 2008 earnings estimate of $11.10 per ADR, which is below the industry median (17.2x). The company is showing improved performance across all segments. Given the company's sales and earnings growth in the face of challenging market conditions, the performance of its chemicals segment is particularly noteworthy.

'Given these developments, we believe the stock deserves to trade in a higher band. We believe the stock should trade at a P/E of 14.1x, which, given our FY2008 estimated EPADR, gives us a target price of $156. We reiterate our Buy rating on the stock.'

MDRX Premium Priced In

Healthcare information services company Allscripts Healthcare Solutions, Inc. (MDRX) missed out on the 2007 estimates as well as some lucrative deals which led Zacks senior medical industry analyst Gregory Aurand, CFA to revise the target price and rate the company as Hold:

'The company acquired Extended Care Information Network (ECIN) for $90 million cash. MDRX expects to benefit from the electronic records cross-selling opportunities that ECIN provides in the hospital and care management segment. Management reaffirmed its 2008 guidance hence, we are not changing our estimates at this time.

'However, upside is possible since the deal appears accretive. The company is expected to release its fourth quarter results after the markets close on February 13. Although the company has missed estimates in 2007, with deals slipping and larger deals taking longer to implement, we believe Allscript's growth outlook continues to be favorable in a robust market.

'However, concerns about growth have also affected the group. At the current price, MDRX trades at 31x our taxed $0.50 GAAP 2008 EPS estimate. Our revised $17.50 target price is a roughly 5 per cent premium to the 2008 1.1x P/E/G average of comparables.'

Downgrading APH to a Hold

Zacks equities analyst Mario Ricchio has recently downgraded the shares of electrical connector manufacturer Amphenol Corporation (APH), from a Buy to Hold. Here are some of the reasons why:

'Amphenol reported fourth quarter EPS of $0.55, above our estimate of $0.52, due to better-than-expected interconnect margins. Fourth quarter sales increased 18% on the back of strong growth in mobile devices, military/aerospace, and mobile networks.

'The industry median multiple is currently 15.4x FY08 EPS, down from 18x. The average stock is down approximately 15% on concerns of a U.S-led end-markets slowdown. Amphenol remains at premium (albeit from a lower level) to peers at 18x our FY08 EPS estimate.