Goodyear has reduced tire production significantly in both North America and Europe. It further plans to close 92 underperforming retail stores. Apart from this, the company also has substantial unabsorbed overhead costs. Weak tire volumes coupled with rising costs compel us to rate the shares a Hold with a target of $16.50.

Goodyear Tire's strength lies in its exposure to the strong heavy-truck market. This helps Goodyear in hedging against earnings volatility in the tire industry. In addition, profit margins are expected to improve as both the Goodyear-brand tires and commercial tires are witnessing an improvement in sales across all markets, capitalizing on improved pricing/product mix and cost reduction efforts.

Goodyear plans to capitalize on worldwide growth in demand for its innovative high-value-added tires, further develop its strong emerging market businesses, enhance its global supply chain and increase its cost reduction efforts. The company anticipates capital investments aggregating $1 $1.3 billion per year from 2008 to 2010.

RAIT Finc'l Trust May Cut Yield

RAIT Financial Trust (RAS) reported good 2Q results with adjusted EPS coming in at $0.54 per share, up about 6% from last quarter. RAS continues to pay off repurchase lines and the company's commercial and residential loans still have low overall delinquencies. The yield is now over 30% and the company continues to cover the dividend ($0.46 per share) with operating cash. Due to the high yield and what we feel is a slightly improving outlook for credit markets, we are continuing our Hold recommendation.

Due to recent share price declines, RAIT represents good value in a battered sector. The company's economic book value was $13.90 at quarter end, up from $10.52 at year end 2007. The company is trading at about .4x economic book. Economic book is a better gauge of a company's value, as it excludes unrealized losses that are in excess of what the company has invested in securitizations. Based on our 2008 Adjusted EPS projections RAIT is trading at 3.3x estimates, well below historical norms and in line with sector averages.

However, with a slumping economy, commercial real estate owners and lenders will be stressed throughout the year. Furthermore, impairments and delinquencies are increasing in the company's commercial and residential loan portfolio. With fewer originations and increasing defaults in the CRE portfolio, a dividend cut is likely in the coming quarters.

PepsiCo Growth Meets Costs

Strong international growth, productivity improvements, an aggressive share repurchase program, and a strong new product pipeline are driving low double-digit earnings growth for PepsiCo (PEP).

Nevertheless, a sluggish domestic carbonated beverage environment, only modest low-single digit volume growth at Frito-Lay, and pressure from higher energy and raw material costs (especially orange and grain costs) are concerns. The Hold recommendation is maintained.

PepsiCo stock is currently selling at 20.7 times trailing 12-month EPS, reflecting the company's growth profile, primarily due to the significant exposure to the snack food category. Carbonated soft drink volume in the U.S. soft drink market has declined for the last four years. We do not expect PepsiCo stock to outperform until expectations for volume growth at FLNA accelerates to 5% or more. The target price of $78 is based on a 22 P/E on trailing 12-month earnings.

Amkor Tech Seeking Balance

Amkor Technology, Inc.'s (AMKR) June quarter revenue was just short of the consensus although the EPS exceeded. Revenue was short of the management's own expectations. Forward guidance is for a 4-6% revenue increase in the third quarter. The company suffered a negative impact from its ERP implementation in the Philippines, which is not expected to continue in the following quarters.

Amkor has stayed ahead with R&D (research and development) programs, despite consistent cost reduction over the last two years. Considering its strong market position, revenue growth opportunities and expanding margins, we would be very positive on the stock. The company is expected to continue experiencing a favorable mix of business, a positive for both revenue growth and profitability. The management is committed to improving the highly leveraged balance sheet. We are reiterating our Hold rating on AMKR shares.

AMKR shares are currently trading at a 6.1x multiple to our 2008 earnings estimate (P/E). We are wary of the phenomenal debt position and the macro environment that could put pressure on the top line. Consequently, we recommend investors to avoid shares for the time being. We are lowering the target price to $10 target price, which corresponds to a P/E multiple of 8.8x.