The Zacks Analyst Blog Highlights: SIRIUS XM Radio, Comcast, Pfizer, Molson Coors Brewing and Anheuser-Busch InBev

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Aug 03, 2011, 09:30 ET

CHICAGO, Aug. 3, 2011 /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: SIRIUS XM Radio Inc. (Nasdaq: SIRI), Comcast Corp. (Nasdaq: CMCSA), Pfizer Inc. (NYSE: PFE), Molson Coors Brewing Co. (NYSE: TAP) and Anheuser-Busch InBev (NYSE: BUD).

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Here are highlights from Tuesday's Analyst Blog:

A Mixed Bag for SIRIUS XM

SIRIUS XM Radio Inc. (Nasdaq: SIRI) declared mixed financial results for the second quarter of 2011. However, the company generated a record high adjusted EBITDA and massive net subscriber addition. Management also raised its target for fiscal 2011 net subscriber addition.

Quarterly GAAP net income was $173.3 million or 3 cents per share compared with a net income of $15.3 million or break-even per share in the prior-year quarter. Second- quarter 2011 EPS of 3 cents was well above the Zacks Consensus Estimate of 1 cent. Quarterly total revenue of $744.4 million was an improvement of 6.4% year over year, but fell below the Zacks Consensus Estimate of $751 million.

Quarterly total operating expenses were $571.4 million compared with $574.1 million in the year-ago quarter. Operating income, in the second quarter of 2011, was $173 million compared with $125.6 million in the year-ago quarter. Quarterly adjusted EBITDA was $185.1 million compared with $154.3 million in the prior-year quarter.

During the first half of 2011, SIRIUS XM generated $213.5 million of cash from operations compared with $141 million in the prior-year period. Free cash flow (cash flow from operations less capital expenditures) in the reported period was $138.2 million compared with a negative $28.3 million in the year-ago period.

At the end of the second quarter of 2011, SIRIUS XM had $528.3 million in cash and cash equivalents and $2,697.7 million of outstanding debt compared with $586.7 million cash and cash equivalents and $2,891.7 million of outstanding debt at the end of fiscal 2010. At the end of the reported quarter, debt-to-capitalization ratio was 0.84 compared with 0.93 at the end of fiscal 2010.

Recommendation

SIRIUS XM is the largest broadcast radio service provider in the U.S. and the second largest entertainment subscription service provider after Comcast Corp. (Nasdaq: CMCSA).We maintain our long-term Outperform recommendation for SIRIUS XM. Currently, it holds a short-term Zacks #1 Rank (Strong Buy) on the stock.

Marginal Beat for Pfizer

Pfizer Inc. (NYSE: PFE) reported second quarter earnings of 60 cents per share, a penny above the Zacks Consensus Estimate, but 2% below the year-ago earnings. Second quarter revenues declined 1% to $16.9 billion, in line with the Zacks Consensus Estimate. Second quarter 2011 results include the impact of the King acquisition from Jan 31, 2011. Including one-time items, earnings increased 6% to 33 cents.

2011 Guidance Maintained

Pfizer maintained its guidance for 2011. The company expects 2011 earnings in the range of $2.16 - $2.26 per share on revenues of $65.2 - $67.2 billion. While SI&A expenses are expected in the range of $19.2 - $20.2 billion, R&D expenses are expected in the range of $8.0- $8.5 billion. The Zacks Consensus Estimate is towards the higher end of the guidance range at $2.25 per share.

Pfizer also maintained its 2012 earnings guidance. The company expects to earn $2.25 - $2.35 per share on revenues of $62.2 and $64.7 billion. The current Zacks Consensus Estimate is $2.28 per share.

The company expects to spend $6.5 - $7.0 billion on R&D. Pfizer intends to focus on those disease areas which represent higher potential. SI&A spend is expected in the range of $17.5 - $18.5 billion.

Lower R&D spend and share buybacks should help drive earnings. The company repurchased shares worth $2.2 billion during the second quarter of 2011. So far in 2011, the company has spent $4.3 billion on share repurchase. Pfizer expects to spend $5 billion - $7 billion on share repurchases in 2011.

Neutral on Pfizer

We currently have a Neutral recommendation on Pfizer, which carries a Zacks #3 Rank (short-term "Hold" rating). While near-term earnings growth will come in the form of cost cutting and share repurchases, longer-term growth will be dependent on the success of drug development.

Pfizer will face additional challenges later this year with the loss of US exclusivity on Lipitor in November.

Molson Coors Misses Estimates

Molson Coors Brewing Co. (NYSE: TAP) reported its adjusted earnings of $1.23 per share in the second-quarter 2011, lagging the Zacks Consensus Estimate of $1.30 per share. The earnings also missed the prior-year quarter earnings of $1.25 per share.

The adjusted earnings in the reported quarter excludes a gain of 4 cents from net proportionate share of MillerCoors pretax special items, environmental litigation reserve, and tax effects related to special and other non-core items. Including one-time items, Molson Coors' earnings exceeded the prior-year earnings of $1.25 by two cents.

Molson Coors' earnings were driven by the impact of continuing weak economic conditions, commodity inflation and investments in the international business in the quarter. However, positive beer pricing, cost reductions in the core businesses and favorable foreign exchange offset the negative impact.

Recommendation

We remain encouraged by the restructuring initiatives taken by the company to reduce overhead costs and boost profitability. The initiatives include closure of underperforming breweries and efforts to improve efficiencies in finance, administration and human resource activities.

Further, the announcement of a new share repurchase program will strengthen the company's balance sheet. Moreover, it signifies that Molson Coors has substantial cash generation capability.

However, seasonal nature of business of Molson Coors and increased competition from Anheuser-Busch InBev (NYSE: BUD) are concerns.

Currently, Molson Coors has a Zacks #3 Rank, implying a short-term Hold recommendation. On a long-term basis, the company maintains a Neutral recommendation on the stock.

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