Following higher demand for acetate filter tow in the Fibers segment, the company plans to increase the acetate tow capacity by 9KMT at its Workington, U.K. facility in 2008. We believe these factors will contribute meaningfully to the company's earnings over the near term.

Eastman's cash flow situation is improving. The balance sheet is in good shape, and the company enjoys good financial flexibility. Valspar is expanding globally through strategic acquisitions. It is also close to completing the restructuring of its industrial plants by 2008, which is expected to lower costs. In the first two quarters, Valspar repurchased 1.85 million shares. It plans to buy back 3.25 million shares in 2008.

Staying Lukewarm on BT Group

BT Group Plc (BT) reported 4Q08 with revenues and earnings, helped by a lower effective tax rate, in line. The company is moving ahead with the expansion of its 21CN network. The company rolled out its wholesale broadband services on 21CN network recently.

BT Global continues to execute well, winning deals valued at £8.0 billion in the trailing-twelve- month period. The cost-cutting measures, capital expenditures in new wave initiatives, the progress of launch of BT Vision and large deal wins give us confidence that the company is moving in the right direction.  The company has been able to expand EBITDA margins due to its restructuring efforts, although pricing pressure is causing traditional revenues to decline.

Shares of BT are currently trading at 8.2x our 2009 earnings estimate of $5.07 after we have raised our currency expectations for the British Pound against the US Dollar to $2.05 per £1, compared to our previous $1.95 per £1 expectation. We have maintained our revenue estimates for 2009 because of the revenue solidity in the most recent quarter while our earnings estimates are maintained for 2009 inclusive of the effects of restructuring expenses and also the weaker dollar.

We believe BT should trade at 8.63x our fiscal 2009 earnings estimate, which gives us a target price of $43.75 over the next six months. We continue to rate shares of BT a Hold and continue to believe that BT will perform well in the US Markets as the US Dollar has remained weak against the British Pound and Euro and as most of its revenues come from Europe.

Hilltop Holdings Sees Incline

Hilltop Holdings Inc. (HTH), formerly known as Affordable Residential Communities (ARC), operates as a property and casualty insurance company providing fire and homeowners insurance through its subsidiary, NLASCO for low-value dwellings and manufactured homes.

ARC was engaged in manufactured housing and related activities, but sold off all its businesses except NLASCO in July 2007. The company incurred a net loss of $0.17 per share in 1Q08, primarily due to investment losses.