Epicor sells products designed for specific types of manufacturing, products such as metal fabrication, industrial machinery, automotive, electronics, consumer goods and aerospace.
Management downgraded its guidance for 2008, primarily due to a cautious outlook for the retail business and expectation for additional investment for the launch of Epicor V9.0. Revenues are now expected between $525 million and $535 million, down from the earlier estimate $536-$544 million.
On a non-GAAP basis, EPS is forecasted to come in the range of $0.75-$0.85, down from the previous forecast of $0.92-$0.96. We continue to rate the stock a Hold with a target price of $8.00.
Amylin Pharma Still Overvalued
San Diego-based Amylin Pharmaceuticals, Inc.'s (AMLN) diabetes drugs Byetta and Symlin sales were both in-line with expectations in the second quarter. However, the Amylin story is tied to the success or failure of phase III potential blockbuster, exenatide LAR. Although the data on LAR presented last month at ADA looked good, we are unconvinced that it will be enough to drive the kind of profitability that justifies an expansion in valuation.
Amylin currently trades at 21x our 2012 EPS estimate of $0.91. The 2012 multiple is a 100% premium to the large-cap pharma / biotechnology peer-group average of 10x 2012 EPS. We believe this premium by Amylin is not warranted given significant questions that surround the future growth of Byetta. Additionally, we are concerned that the recent pancreatitis fears will cause a delay in the LAR filing, currently guided for the middle of 2009.
Even with $1.5 billion in LAR sales in 2012 and a 15% tax rate, Amylin's operating margin of only 10% is about half that of the peer-group. We are still at levels where we believe the name is overvalued. We think the shares are stuck in a tight trading range until the market gets a better sense of all above issues. In the meantime, we see $20 as fair value, but would avoid the name.
CNOOC Still Dominant Offshore
CNOOC, Ltd. (CEO) is one of the three oil companies in China and one of the largest independent oil and gas exploration and production companies of the world. It is China's dominant producer of offshore crude oil and natural gas.
We are maintaining our Buy recommendation on CNOOC ADRs following the company's strong first half 2008 operational results. Net income surged 89%, driven by higher oil prices and volume growth. Volumes were up 8.3% in the first half of the year, with full-year growth expected to exceed that level.
The company's capital budget this year is essentially flat from the year-earlier level. Our continued favorable view of CNOOC, Ltd. ADRs reflects the company's positive production-growth profile, exclusivity in the offshore China region, and LNG investments.
Skyworks Still Shooting Sparks
Skyworks Solutions, Inc. (SWKS) was formed through the merger of the wireless business of Conexant Systems, Inc. and Alpha Industries, Inc. on June 25, 2002. The company is headquartered in Woburn, Massachusetts. Skyworks designs, manufactures and markets wireless semiconductor solutions for the mobile communications industry.
SWKS appears to be winning business in handset semis -- Nokia (NOK) in particular -- as well as successfully broadening its footprint in linear products. Going forward, based on new product ramps at leading handset customers and continued end-market diversification, management expects revenues of $225 million in Q4 while EPS is anticipated to be $0.20.
In the long run, the company targets quarterly revenues of $250 million and gross margin of 42%. We have a Buy rating on the stock and with a target price of $12.
Tejon Ranch a Strong Investment
Tejon Ranch Co. (TRC) is a real estate development and agri-business company committed to responsibly utilizing its land and resources to meet the housing, employment and lifestyle needs of Californians and create value for shareholders. The company's operations consist of land planning and entitlement, land development, commercial sales and leasing, leasing of land for mineral royalties, grazing leases, income portfolio management, and farming.
The company's prime asset is approximately 270,000 acres of contiguous, largely undeveloped land that, at its most southerly border, is 60 miles north of Los Angeles and, at its most northerly border, is 25 miles south of Bakersfield. Tejon Ranch is the same size as Hong Kong and is 40% the size of Rhode Island.
We expect the value of land to significantly increase as further entitlement processes are completed, which involve state and county approval along with the expected subsequent law suits by environmental groups. As management succeeds in its vision of developing Tejon Ranch over the next 25 years, the valuation per acre should dramatically increase.
