Zacks Analyst Blog Highlights: Big Lots, Target, Wal-Mart Stores, AstraZeneca and Dendreon Corporation

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Feb 09, 2011, 09:30 ET

CHICAGO, Feb. 9, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features: Big Lots Inc. (NYSE: BIG), Target Corporation (NYSE: TGT), Wal-Mart Stores Inc. (NYSE: WMT), AstraZeneca (NYSE: AZN) and Dendreon Corporation (Nasdaq: DNDN).

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Here are highlights from Tuesday's Analyst Blog:

Big Lots Up for Sale?

According to Bloomberg, Big Lots Inc. (NYSE: BIG), the largest broad-line closeout retailer, is looking for strategic choices which might include the sale of the company.

Big Lots, which competes with Target Corporation (NYSE: TGT) and Wal-Mart Stores Inc. (NYSE: WMT), has hired Goldman Sachs to guide on the evaluation process.

However, the company has not made any statements in terms of explicit actions regarding the sale of the company or in any other possibilities.

The buzz is that Thomas H. Lee Partners LP and Bain Capital LLC would be interested in the acquisition.

For the bidders, Big Lots offers a striking prospect for acquisition, as it has a healthy balance sheet with almost no debt. Further, the company's closeout format provides it an edge over traditional discount retailers as it offers merchandise assortments to customers at cheaper rates.

The company procures branded merchandise at lower costs from vendors, who have excess inventory and resort to a fire sale of their goods, or have higher sales returns or discontinued products.

Based in Columbus, Ohio, Big Lots has a strong management team and is actively managing its capital. The company expects to generate cash flow of approximately $200 million in fiscal 2010. The company is also returning much of its free cash to shareholders via share repurchase.

However, Big Lots operates in extremely aggressive money off retail business, faces sturdy competition from other general merchandise, discount, food, arts and crafts, and dollar store retailers. This may result in loss of market share and fall in sales and operating margins. Further, the competitors having larger number of stores, greater market presence, and financial resources will continue to weigh on the company's results.

Moreover, the company's consumers remain susceptible to macroeconomic factors including interest rate hikes, increase in fuel and energy costs, credit availability, unemployment levels, and high household debt levels, which may negatively impact their disposable income, and in turn, affecting the company's growth and profitability.

After a broad evaluation, we prefer to maintain a long-term Neutral recommendation on the stock. Big Lots also holds a Zacks #3 Rank, which translates into a short-term Hold rating.

Pipeline Setback for AstraZeneca

AstraZeneca (NYSE: AZN) recently suffered a pipeline setback with the company announcing the discontinuation of a phase III study that was being conducted with its prostate cancer candidate, zibotentan.

The company said that it has halted ENTHUSE study 15, which was evaluating zibotentan as a monotherapy in patients suffering from non-metastatic castrate resistant prostate cancer (CRPC). The decision to halt the study was based on a review conducted by an Independent Data Monitoring Committee (IDMC).

The IDMC conducted an early efficacy review which indicated that zibotentan would not be able to meet its primary endpoints of progression free survival and overall survival. Earlier too, AstraZeneca has faced a setback with the development of zibotentan when the candidate failed to meet the primary endpoint in another phase III study (study 14).

Despite the setback faced in these two studies, AstraZeneca is continuing to evaluate the candidate as a combination therapy for the treatment of patients suffering from advanced metastatic CRPC. Full results from this study are due in the second half of 2011.

The successful development of zibotentan would be a major boost for AstraZeneca given the commercial potential represented by the prostate cancer market. According to the company, prostate cancer is the most commonly diagnosed male cancer in several western countries. It is estimated that more than 670,000 men are diagnosed with prostate cancer every year, with the incidence increasing.

The setback faced by zibotentan is favorable news for Dendreon Corporation (Nasdaq: DNDN), whose Provenge was launched in May 2010.

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