Zacks Bull and Bear of the Day Highlights: Amgen, Montpelier Re Holdings, Cisco Systems, Illumina and Roche Holdings

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Feb 09, 2012, 09:30 ET

CHICAGO, Feb. 9, 2012 /PRNewswire/ -- Zacks Equity Research highlights Amgen, Inc. (Nasdaq: AMGN) as the Bull of the Day and Montpelier Re Holdings (NYSE: MRH) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Cisco Systems (Nasdaq: CSCO),Illumina (Nasdaq: ILMN) and Roche Holdings (OTC: RHHBY).

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Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.

Here is a synopsis of all five stocks:

Bull of the Day:

Amgen, Inc. (Nasdaq: AMGN) reported fourth quarter earnings per share of $1.19, 5 cents below the Zacks Consensus Estimate, but 3.5% above the year-ago period. However, Amgen provided better-than-expected guidance for 2012. The company expects earnings in the range of $5.90 - $6.15 per share on revenues of $16.1 - $16.5 billion.

Amgen also announced its intention to acquire Micromet. We have raised our 2012 earnings estimate by 48 cents to $5.94 per share. The upward revision in earnings estimates has pushed the Zacks Rank for Amgen to #2, which indicates a Buy rating in the short-term.

Based on the strong outlook for 2012, the upward revision in estimates and the Zacks Rank, we are upgrading the stock to Outperform. Share repurchases and cost control should help the company achieve at least the lower end of its guidance range.

Bear of the Day:

We are downgrading Montpelier Re Holdings (NYSE: MRH) to Underperform from Neutral based on the company's expectation of incurring operating losses in the fourth quarter. The current pricing environment in the primary insurance market and the stressed economy are expected to restrict top-line growth.

Montpelier has guided fourth-quarter 2011 net operating loss in the range of $0.25-$0.35 per share. Montpelier's fourth quarter loss guidance includes an adverse impact of $40 million arising from floods in Thailand, an adverse impact of $26 million from catastrophe losses and also takes into account favorable prior year loss reserve development of $18 million.

Our six-month target price is $16.00. This price target along with the annual dividend of $0.42 implies a negative return of 10.3% over that period. This is consistent with our Underperform rating.

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Cisco Impresses in Q2

After the bell Wednesday, Cisco Systems (Nasdaq: CSCO) reported stellar earnings and revenue results that easily beat Zacks Consensus Estimates. The tech giant posted EPS of 43 cents per share (note: at Zacks we do not adjust results for employee stock options) on revenue of $11.5 billion, which bested estimates of 38 cents and $11.23 billion, respectively.

Recall a year ago, when a weak tech environment sent Cisco Systems struggling to gain traction. The company regained focus -- not simply on routers and switches but Enterprise, Commercial, Search and Cloud-based businesses, as well -- and now sees 11% growth and gross margins of 62.4%.

Shares of CSCO have risen off October 2011 lows by more than 30%, and there looks to be more to come in the near-term. After gaining 1% in regular-day trading today, Cisco's impressive earnings beat has shot up 3% since.

Illumina Beats, Spurns Roche Offer

Illumina (Nasdaq: ILMN) reported EPS of 9 cents in the fourth quarter of 2011, well below the year-ago quarter EPS of 25 cents. However, after adjusting for certain one-time items, EPS came in at 35 cents, ahead of the Zacks Consensus Estimate of 30 cents and 20.7% higher than the prior-year quarter.

For the full year, adjusted EPS came in at $1.30, surpassing the Zacks Consensus Estimate of $1.25 and the year-ago figure of $1.06.

Revenues dipped 4% year over year to $250 million during the quarter. However, it was ahead of the Zacks Consensus Estimate of $248 million. This drop was primarily due to a 6.2% decline in product revenues, partly offset by a 25.5% rise in service revenues.

Outlook

Illumina expects fiscal 2012 revenues in the range of $1.10 – $1.175 billion (annualized growth of 4% –11%). The Zacks Consensus Revenue Estimate is close to the lower-end of the expected range. The adjusted gross margin is expected to be 70% for 2012. The company also expects adjusted EPS in the range of $1.40–$1.50 (the Zacks Consensus Estimate is $1.41).

For the first quarter of fiscal 2012, Illumina expects revenues in the range of $250 –$260 million ($258 million) with adjusted EPS of 29 cents–32 cents (31 cents) assuming approximately 133 million shares. Adjusted gross margin guidance for the quarter is 69%.

Illumina Rejects Roche's $5.7 billion Offer

In separate news, Illumina unanimously declined Roche Holdings' (OTC: RHHBY) offer of $44.50 per share (aggregate value $5.7 billion) in cash as it considers this offer to be grossly inadequate.

We note that Roche had made multiple efforts in the past to strike a deal with Illumina. However, Illumina was unwilling to participate in substantive discussions. This led Roche to commence a tender offer to purchase Illumina's outstanding shares.

Presently, Illumina retains a short-term Zacks #3 Rank (Hold) which also corresponds to our Neutral recommendation over the long term.

Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.

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