Though the company has managed to hold on to its AAA credit rating, with a negative outlook we remain concerned for further rating downgrade. Also, continued concerns for further deterioration in the mortgage markets should not bode well for results over the next several quarters.
Therefore, given the continued uncertainty for the group, we maintain a Sell rating. Our six-month price target of $8.10 per share, down from $10.00 per share, reflects a 0.90x multiple to our book value estimate of $9.00 per share at June 30, 2008. As a result, we are maintaining our Sell recommendation on the shares of MBI.
In addition, the quantitative Zacks Rank for MBI is currently 3, indicating no clear directional pressure on the shares over the near term. Short interest ratio is 9.3 days, versus 4.0 days previously.
Rockwell Automation Rocking (Well)
Rockwell Automation, Inc. (ROK) is a leading industrial automation company, providing power, control and information solutions to improve manufacturing capacity. The company reported second quarter EPS of $0.96, up 17.1% from the prior-year quarter, amid strong productivity performance, higher sales volume, and pricing gains.
Acquisitions are now providing more top-line boost, but at the cost of mitigating operating leverage. Management is confident that recent growth investments and international diversification will deliver FY08 revenue up 10-12%, with international sales expected to deliver mid-teens organic growth and North America accelerating modestly to mid-single-digits.
We reiterate our Buy rating on shares of ROK with a target price of $63.00 per share. The shares of Rockwell are currently trading at 12.9x our FY08 EPS estimate of $4.34, at a discount to the industry median multiple and its peer group. The company has a leadership position in the industrial automation space. Over the past several quarters, the company's financial performance has benefited from a number of items, including a falling U.S. dollar, strong productivity, and higher volume.
