However, CXR's ad revenue and EBITDA growth are being squeezed by the economic downturn, exacerbating secular industry pressures, as listeners migrate to recorded music (iPods), satellite radio and the Internet. CXR shares are trading at a slight premium to its radio broadcasting peers. We think this premium is deserved given its healthy free cash flow and low level of leverage relative to the group.
Management is targeting a leverage ratio of 3x, which provides it with room to continue repurchasing shares (it recently authorized another $100 million repurchase program). However, at this point in radio's cyclical and secular slowdown, we see no near-term catalysts for CXR shares to outperform the broader market.
Ride Buy-Rated Churchill Downs
We reiterate our Buy rating on shares of Churchill Downs Incorporated (CHDN) following the release of first quarter financial results. The company currently faces significant operating pressures resulting from disputes with horsemen's associations in Florida and Kentucky. However, the pullback in share price over the last week has created a buying opportunity, in our opinion.
The company has established a platform that should enable it to grow revenues and earnings via a variety of channels, including the expansion of alternative gaming. We believe that a proper valuation of Churchill's shares should reflect not only the value of the current operations, but also the potential for increased revenue and earnings stemming from additional alternative gaming a the company's properties. Further, the company's low leverage and significant real estate holdings should be taken into account.
The shares are currently trading at approximately 26.5x our 2008 EPS estimate of $1.64, and at approximately 9.1x our 2008 EBITDA estimate, excluding the impact of insurance recoveries recognized in 2008. Our 12-month price target of $53 per share equates to approximately 32x our 2008 EPS estimate and approximately 11x our 2008 EBITDA estimate. While these multiples represent premiums to the current peer group average, we believe that such a premium is appropriate.
Expect NCR Corp. to Outperform
Following several years of stagnant revenue growth, NCR Corporation (NCR) has begun to post gains in its Financial Self-Service segment, its largest division. NCR now expects 2008 year-over-year revenue growth of 5% to 7% from continuing operations, up from previously provided guidance of 3% to 5% revenue growth.
We are encouraged that the company is now posting earnings growth through its improved top-line, which we believe is sustainable for the foreseeable future as its customers seek to cut costs through increased automation. Although its fastest growing business, Teradata, is no longer a part of the company, we are encouraged with growth in Financial Self-Services, as well.
Shares of NCR are currently trading at 16.6x our 2008 EPS estimate of $1.54, a discount to the industry mean. Given the improved outlook for NCR, we maintain our Buy rating on the shares. Our six-month target price of $32 reflects a P/E multiple of 20.8x our 2008 EPS estimate, a premium to the industry median.
Bullish on Myriad Genetics
Myriad Genetics, Inc. (MYGN) is a biopharmaceutical company that focuses on the development of diagnostic and therapeutic products. The company employs a variety of proprietary proteomic technologies to identify genes, their relative proteins, and their pathways.
