The Zacks Analyst Blog Highlights: Gannett, Local, Teleflex, Covidien and CareFusion

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Oct 26, 2012, 09:30 ET

CHICAGO, Oct. 26, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Gannett Inc. (NYSE:GCI), Local Corporation (Nasdaq:LOCM), Teleflex Incorporated (NYSE:TFX), Covidien (NYSE:COV) and CareFusion (NYSE:CFN).

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Here are highlights from Thursday's Analyst Blog:

Gannett Buys Rovion

Recently, Gannett Inc. (NYSE:GCI) – a leading media and marketing solutions company – stated that it has bought Rovion, an advertising company, which was a part of Local Corporation (Nasdaq:LOCM). Per the deal, Gannett acquired Rovion along with its other related assets. The financial terms of the acquisition were not disclosed.

Boston-based Rovion will form a part of the Gannett Digital organization under PointRoll and will help all Gannett segments to gain the advantage of its capabilities. Rovion is famous for its principal product 'Ad Composer,' which facilitates a self-service platform for creating rich media and mobile HTML₅ ads. Another major benefit of Ad Composer is that it does not require any encrypting expertise.

Off late, advertising and print media companies are mainly looking for mobile rich media advertisement solutions and self-service advertisement creation tools with a view to diversify their portfolio. As a result, we believe Gannett's acquisition is the ideal deal for the company, which will enhance its mobile and self-service capabilities.

The deal demonstrates Gannett's strong cash position, evident by $237.4 million of cash at the end of the third quarter. Further, the company generated free cash flow of $161.8 million at the end of the quarter.

Recently, Gannett announced better-than-expected third quarter results with quarterly earnings of 56 cents a share, which surpassed the Zacks Consensus Estimate by a couple of cents, and expanded 27.3% from last year's 44 cents, reflecting a surge in television advertising attributed to Olympics and political spending, and subscription based model.

Gannett remains committed to streamlining its cost structure, strengthening its balance sheet and rebalancing its portfolio. However, we remain apprehensive about risks that the company faces due to its high dependence on advertising revenues.

Currently, we prefer to remain on the sidelines and maintain our long-term Neutral recommendation on the stock. However, the company holds a Zacks #1 Rank that translates into a short-term Strong Buy rating, and well defines the company's effort to navigate through challenging times.

Teleflex Closes LMA Buyout

Teleflex Incorporated (NYSE:TFX), a global leader in medical devices used in critical care and surgery, recently closed its earlier announced acquisition of all the assets of Willemstad, Netherlands based LMA International N.V. as well as LMA's branded laryngeal mask supraglottic airway business and other equipments of Intavent Direct Limited.

Conjointly, Teleflex expects the acquisitions to be accretive to the company's adjusted earnings per share in the range of 3 cents to 4 cents for 2012 and 35 cents to 40 cents for 2013. This projection excludes non-recurring purchase accounting items and other costs associated with takeovers and mergers.

The acquisition will enhance Teleflex's anesthesia product line as LMA is a global provider of medical equipment to anesthetists. LMA is also considered to be a worldwide leader in laryngeal masks which will allow Teleflex to gain market leading position for this offering.

Collectively, these acquisitions will expand Teleflex's anesthesia and respiratory care business line. This is expected to result in a well-regarded, highly diversified business segment with annual sales of $530 million or higher. The acquisitions will also extend the company supply chain. Teleflex intends to achieve this through improved relationships with group purchasing organizations.

Limerick, Pennsylvania-based Teleflex' focus on profitable and consistent growth is expected to yield results, helped by demographic trends and barriers to entry in the industry. The recent divestiture of its OEM Orthopedic division is expected to aid the company's strategy of new product introduction, and investment in innovative technologies. This will accelerate the Teleflex top-line in the years ahead.

However, Covidien (NYSEp:COV) and CareFusion (NYSE:CFN), which operate in similar business segments present a tough competitive landscape for Teleflex. Additionally, the company operates in a seasoned regulatory environment. The demand for its products is susceptible to healthcare reimbursement systems in the domestic as well as the international markets.

Teleflex currently carries a Zacks #2 Rank, which translates into a short-term Buy rating.

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