Zacks Analyst Blog Highlights: Endo Pharmaceuticals, MarkWest Energy Partners L.P., AutoZone, O’Reilly Automotive and Advance Auto Parts

Mar 02, 2011, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, March 2, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features: Endo Pharmaceuticals (Nasdaq: ENDP), MarkWest Energy Partners L.P. (NYSE: MWE), AutoZone Inc. (NYSE: AZO), O'Reilly Automotive Inc. (Nasdaq: ORLY) and Advance Auto Parts Inc. (NYSE: AAP).

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Here are highlights from Tuesday's Analyst Blog:

Endo Pharma Tops, Guides Up

Endo Pharmaceuticals' (Nasdaq: ENDP) fourth quarter 2010 earnings (excluding special items) of $1.06 per share, surpassed the year-ago earnings by 25 cents and the Zacks Consensus Estimate by 10 cents. The impressive showing was attributable to the higher revenues reported in the final quarter of 2010.

Quarter in Details

Revenues climbed 31% to $511 million in the reported quarter. The revenue increase was attributable to impressive performances across all segments at Endo Pharma. Revenues easily surpassed the Zacks Consensus Estimate of $479 million.

The final quarter of 2010 witnessed a 9% rise in the sale of branded and non-promoted drugs to $395.2 million. The impressive showing by key products in pain, urology and oncology drove the increase. The sale of generic products at Endo Pharma jumped 125% to $65.5 million in the fourth quarter of 2010.

Revenues from the segment were aided by the inclusion of results from Qualitest Pharmaceuticals (a generic company). We remind investors that Qualitest Pharmaceuticals was purchased by Endo Pharma late last year for $1.2 billion in cash.

Revenues from devices and services accounted for the balance in the reported quarter. The entire revenues from the segment came from HealthTronics, which was acquired by Endo Pharma in July 2010.

Adjusted selling, general and administrative expenses declined 1.7% to $142.5 million driven by prudent cost management. Adjusted research & development expenses climbed 5% to $34.6 million in the final quarter of 2010.

Disappointing Quarter for MarkWest

Pipeline operator MarkWest Energy Partners L.P. (NYSE: MWE) reported weak fourth quarter results, reflecting lower natural gas liquid sales in the Northeast and East Texas.

The partnership incurred loss per unit (excluding marked-to-market derivative loss and compensation expense) of 5 cents, against the Zacks Consensus Estimate of profit of 33 cents. In the year-ago period, the Colorado-based MarkWest earned 75 cents per unit on an adjusted basis.

However, revenue of $356.6 million was up 26.3% from the fourth quarter 2009 level and was also ahead of our projection of $338.0 million.

Guidance

Looking forward, management guided towards a DCF of approximately $260$300 million for 2011, up from the previous guidance of $240$280 million.

AutoZone Profits on Store Opening

AutoZone Inc. (NYSE: AZO) recorded a 20% increase in profit to $148.1 million in the second quarter of its fiscal 2011 from $123.3 million in the same quarter of the prior fiscal year. On earnings per share basis, profits of $3.34 increased from $2.46 in the year-ago quarter, beating the Zacks Consensus Estimate by 27 cents per share.

Net sales grew 10.3% to $1.66 billion, which was higher than the Zacks Consensus Estimate of $1.63 billion. Domestic same store sales, i.e., sales for stores open at least one year, rose 7.1% during the quarter compared with a meager 1.0% in the comparable quarter of 2009.

The improvement in results was attributable to the company's higher sales volume backed by an aggressive store expansion strategy.

Total auto parts sales scaled up 10.3% to $1.62 billion, reflecting sales per average store of $349,000, an increase of $20,000 from the prior year level. Domestic commercial sales escalated 21.2% to $213.8 million while all other (ALLDATA and e-commerce) sales increased 11.2% to $37.0 million.

Gross margin went up marginally to 50.9% from 50.0% in the second quarter of last fiscal year. The increase in gross margin was attributable to increased penetration of the company's Duralast product and lower product acquisition costs. Meanwhile, operating margin improved to 16.4% from 15.3% in the fiscal 2010-quarter.

Our Take

AutoZone is focused on expansion of its Hub store, acceleration of store maintenance and strengthening of its commercial sales force. Besides, we appreciate the company's aggressive share repurchase policy, supported by a strong cash flow.

However, AutoZone relies heavily on its private label brands, which could hinder its business should they falter. Vendor consolidation and appreciation in gas prices are other threats facing the company. Therefore, the company retains a Zacks #3 Rank, which translates to a short-term (1 to 3 months) recommendation of Hold and we have reiterated our long-term recommendation (more than 6 months) of Neutral.

Peer Performance

Both of AutoZone's peers, O'Reilly Automotive Inc. (Nasdaq: ORLY) and Advance Auto Parts Inc. (NYSE: AAP) showed impressive performances during the recent quarter as well.

O'Reilly posted a 37% rise in profit to $98.5 million or 69 cents per share in the fourth quarter of 2010 from $71.9 million or 52 cents per share in the same quarter of 2009 (all excluding net gain on settlement of note receivable). With this, the auto parts retailer topped the Zacks Consensus Estimate by 5 cents per share and its own earnings per share guidance of 56 cents–60 cents per share.

On the other hand, Advance Auto reported a 40% rise in profit to $48.1 million or 57 cents per share for the fourth quarter fiscal 2010 ended January 1, 2011 from $34.5 million or 36 cents per share in the same period a year ago. The profit exceeded the Zacks Consensus Estimate by 2 cents per share.

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