Tupperware Brands Corporation

Strong demand in the emerging markets was key to this famous container company's stellar first-quarter earnings report.

Tupperware Brands Corporation (TUP) is a global direct seller of home and beauty products across multiple brands and categories through an independent sales force of two million.

Tupperware operates in two segments: Tupperware and Beauty. The company sells eight brands in those two segments in 100 countries including Tupperware, Avroy Shlain, Beauticontrol, Fuller, Naturecare, Nutrimetics, Nuvo, and Swissgarde.

On Apr 22, the company reported first-quarter earnings that beat Wall Street estimates by 12%, or 6 cents a share. Earnings per share rose 56% to 56 cents compared to 36 cents per share in 2007. The company benefited from stronger foreign currencies. Analysts expected 50 cents per share.

Sales grew 19% to $543 million. Tupperware saw growth in all five of its operating segments, ranging from 8% to 13%.

The company is seeing big gains in the emerging markets in its Tupperware segment. In Europe, first quarter sales rose by 23% over the prior year, with the emerging market countries of Russia, Turkey and South Africa up 38%. Established markets, such as Germany, grew 18% during the same period.

The story was the same in the Asia Pacific region as sales in emerging markets were up 28% and in established markets they rose 21%. The number of active sellers rose 16%, with Indonesia, India and Australia seeing the largest gains.

Even the North America segment, which includes the United States, Canada and Mexico, saw sales gains of 11% despite the slowing U.S. economy.

In the Beauty segment, North America saw a 10% sales increase furthered by a double-digit increase by Fuller Mexico. The Beauty Other segment saw a 25% sales increase reflecting higher sales throughout Central and South America, especially in Venezuela, Brazil, and Argentina.

Tupperware Raises 2008 Guidance

The company is bullish about 2008, especially in the emerging markets. TUP expects sales in the Tupperware segments to increase 13 to 15% and in the Beauty segments to increase 10 to 12%, including the benefit of stronger foreign currencies.

Tupperware raised its 2008 guidance by 17 cents to a range of $2.67 to $2.77 from the previous guidance of $2.50 to $2.60. TUP expects higher profit from the segments and stronger foreign currencies.

'Looking at full year 2008, we will be capitalizing on our double digit sales force size and active representative advantages to further grow our businesses. We're pleased to be able to raise our 2008 sales outlook range to a 13 to 15% increase from 8 to 10% in January,' said Chairman and CEO, Rick Goings.

'This includes low double-digit growth from the close to 50% of our businesses that operate in emerging markets and, on average, a low single digit growth rate from the remainder of our businesses that operate in established markets,' he said.

Analysts Raise Estimates for the Second Quarter and the Full Year

In response to the strong quarter, brokerage analysts raised estimates for the second quarter by five cents to 67 cents from 62 cents per share. For the year, consensus estimates rose 15 cents to $2.75 per share to match the company's bullish guidance. Consensus is now at the high-end of the company's forecasted range.

Tupperware, a Zacks #1 Rank (Strong Buy), has a 2008 P/E of 14.15, under the industry average of 18.08. Its price-to-book is 4.4. The company has surprised on estimates the last four quarters by an average of 31.39%.

Buy FEMSA Up to $60 per Share

We are keeping our Buy recommendation on Coca-Cola FEMSA S.A. de C.V. (KOF). On April 25, 2008, Coca-Cola FEMSA reported better-than-expected first quarter 2008 results. Total revenue reached MXN$17,257 million (US$1,597.7 million) from MXN$ 18,361 million in the previous quarter, and MXN$ 16,225 million in the first quarter of 2007. Revenues in the Mexican business increased 6.7% year-over-year, and average price per case went up 1.8%.

Central American revenues increased 3% year over year, and average price per case decreased 1.8%. The results in the Mercosur division were particularly impressive, and its Mexican results also showed a considerable improvement. Additionally, the short-term outlook for Latin American economic growth remains positive, despite the difficult economic environment in the U.S. and its effects on Mexico.

The company also benefited from the strength of most Latin American currencies, a trend that should prevail in the following quarters. KOF has been reducing net debt, a necessary step to reduce financial costs and increase confidence.

Currently, Coca-Cola FEMSA is trading at 13.8x our 2008 revised earnings estimates, a considerable discount to the industry mean and median. We believe the discount is due to the company's exposure to the volatile Latin American business environment, the competitive business environment and the company's above-average leverage.

Considering the better-than-expected first quarter 2008 results and the positive outlook for Latin America for the following quarters, we believe the stock's valuation is still attractive, in spite of the threat from the U.S. economic concerns. We think KOF's shares have a considerable upside potential and deserve a valuation closer to the industry median. We are using a P/E multiple of 16x our 2008 revised earnings estimate to calculate our target price of $60.

Keep Positive on PartnerRe

PartnerRe Ltd.'s (PRE) 1Q08 operating earnings of $110.2 million or $1.98 per diluted share were substantially short of estimates. The results benefited from a moderate level of incurred losses, strong investment income growth, and a weakening U.S. dollar, which were more than offset by the softening in reinsurance pricing and higher costs.

We are maintaining our Buy recommendation on the shares of PRE, but with a lower six-month target price of $83 per share, based on the continued softening in pricing environment. After reviewing 1Q08 results, which were lower-than-expected, as a result of higher costs and lower policy prices, we are slightly moderating our FY08 and FY09 estimates to $9.79 per share and $10 per share, respectively.

At the current price, the shares of PRE trade at 1.05x its 1Q08 book value of $70.93 per share, well below the middle of its 10-year range, (which bottomed in 1999 at 0.89x and peaked in 2001 at 1.73x) and at a 17% discount to the peer group median (versus a 12% discount at the time of our last full report). We expect some expansion in the multiples in the coming quarters based on PRE's superior capitalization, strong underwriting results, and diversified portfolio (by product as well as geography), somewhat offset by an above average risk profile and financial leverage.

We expect PRE to continue delivering strong results for the coming quarters based on its excellent underwriting abilities, strong capitalization, solid ratings (S&P and A.M. Best recently affirmed the ratings) and reputation in the market, despite some softening in the non-life re-insurance pricing and higher costs, though we suspect that the current negative sentiment for the financials as a whole may somewhat weigh on the share price momentum. We are maintaining our Buy recommendation on the shares.

Barrier Sees Break-even in 2010

Barrier Therapeutics, Inc. (BTRX) is a biopharmaceutical company focused on the discovery, development, and commercialization of pharmaceutical products in the field of dermatology. Although the company launched two new products (Vusion and Xolegel) in 2006, revenue contribution from these products will not be sufficient to drive Barrier to profitability in the near future.

We believe that the main potential for the company lies with Hyphanox -- we expect to see phase III data on this candidate later this year. Positive results on Hyphanox and suitable partnership deals for Pramiconazole and Hyphanox would help restore investor confidence in the company. In the mean time, we prefer remaining on the sidelines.

Following the release of first quarter results, Barrier announced certain strategic initiatives with the aim of achieving break-even in 2010. The company intends to drive top-line growth through the skillful execution of its sales and marketing plans and through low cost and quick turnaround product line extensions. Barrier also intends to in-license products in late-stage clinical development or co-promote approved products.

Besides this, the company has decided to focus its R&D spend on projects that represent significant returns for the company. In keeping with this strategy, the company has decided to focus its development efforts on Hyphanox which, if approved, should represent significant commercial opportunity.

It is difficult to value BTRX shares, given its little revenue and negative EPS. We currently rate BTRX a Hold, with a price target of $2.50.

Liquidation Keeps DPL Flush

DPL Inc. (DPL) continues to benefit from its stable regulated electric power operations. The advent of 2008 saw gains on sale of emission allowances, higher top-line and rates mainly in the retail segment, and lower O&M expenses. Moreover, the liquidation of the company's investment portfolio provides sufficient capital for expanding the utility's operating base, reducing debt and interest expense, buying back stock and/or increasing the dividend.

However, increased purchased power costs, ongoing investigations by the Securities and Exchange Commission (SEC) and the Internal Revenue Service (IRS), and uncertainty over the successful allocation of new capital toward greater earnings power remain concerns. Accordingly, we maintain a BUY recommendation on DPL common stock with a six-month target price of $30.25.

Price appreciation to our near-term valuation target, coupled with the recently increased $0.275 per share quarterly cash dividend which we deem sustainable and secure represents annualized total return potential of 24.5%. DPL continues to benefit through its stable regulated electric power operations. Moreover, the liquidation of the company's private equity investment portfolio provides sufficient capital for expanding the utility's operating base, reducing debt, repurchasing stock, and/or increasing its dividend.

Going forward, investors may take comfort in management's strategic shift toward stable regulated utility operations, focus towards environment friendly power and away from volatile unregulated businesses. As of the date of this report, DPL trades at 13.9x and 12x, respectively, our 2008 and 2009 earnings per share estimates, or at a discount to its diversified energy utilities peers.

Given our preference for share price multiples of operating earnings relative to comparable multiples of a company's peers, combined with above industry average long-term earnings growth expectations, forecasted year-over-year EPS through 2009, a competitive dividend yield and continued consolidation in the utilities sector, we maintain our BUY recommendation on DPL common stock with a six-month target price of $30.25.