Zacks Bull and Bear of the Day Highlights: Cabot Oil & Gas, JDS Uniphase, Dr. Reddy's Laboratories, Pfizer and Novartis AG
CHICAGO, June 14, 2011 /PRNewswire/ -- Zacks Equity Research highlights: Cabot Oil & Gas Corp. (NYSE: COG) as the Bull of the Day and JDS Uniphase (Nasdaq: JDSU), as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Dr. Reddy's Laboratories (NYSE: RDY), Pfizer Inc. (NYSE: PFE) and Novartis AG (NYSE: NVS).
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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:
We are upgrading Cabot Oil & Gas Corp. (NYSE: COG) shares to Outperform from Neutral, reflecting the company's impressive exposure to the high-return Marcellus and Haynesville Shale plays, as well as its above-average production growth. Furthermore, the capital infusion of over $200 million bodes well for Cabot, which will help the company bolster its natural gas operations.
Buoyed by the growth momentum from the company's drilling efforts, particularly in its North region, Cabot recently reported better-than-expected first-quarter results. A relatively low-risk profile and longer reserve lives are other positives in the Cabot story.
Considering these factors, we believe Cabot is well positioned going forward and consider it an attractive investment. Our $71 price objective is based on a multiple of 16.8X trailing twelve-month cash flow.
We downgrade our recommendation on JDS Uniphase (Nasdaq: JDSU) to Underperform. Recent trends in the optical component industry indicate a glut of inventory on the part of the telecom carriers. The North American and European markets have yet to completely recover from the recession.
In the meantime, several industry players indicated that China may not be able to compensate the loss of the developed markets fully. Moreover, the devastating earthquake and tsunami in Japan will reduce demand and may disrupt the supply chain. We believe the weak industry demand may continue for a couple of quarters.
Excluding these broad-based macro scenarios, JDS Uniphase is facing growing competition in those sub-segments of the optical network industry, which had been exclusive to the company. Meanwhile, the stock price of JDS Uniphase surged more than 86% last year.
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Dr. Reddy's Launches Generics in U.S.
Dr. Reddy's Laboratories (NYSE: RDY) recently announced the launch of three generic products in the US. The company launched the generic versions of Pfizer Inc.'s (NYSE: PFE) anti-depressant, Effexor XR, Eisai Co. Ltd.'s Alzheimer's treatment, Aricept, and Novartis AG's (NYSE: NVS) breast cancer treatment, Femara.
Dr Reddy's abbreviated new drug application (ANDA) for the generic version of Effexor XR (venlafaxine hydrochloride extended release capsules; 37.5 mg, 75 mg and 150 mg), was approved by the US Food and Drug Application (FDA) on May 5, 2011. According to IMS Health, total US sales of Effexor XR and its generic version amounted to $2.3 billion for the twelve months ended March 31, 2011.
The company's ANDA for the generic version of Aricept, (donepezil hydrochloride tablets; 5 mg and 10 mg), was approved by the FDA on May 31, 2011. According to IMS Health, total US sales of Aricept and its generic version amounted to $2.3 billion for the twelve months ended March 31, 2011.
Finally, Dr. Reddy's ANDA for the generic version of Femara (letrozole tablets; 2.5 mg) was approved by the FDA on June 3, 2011. Total US sales of Femara amounted to $702 million for the twelve months ended March 31, 2011, according to IMS Health.
We believe that the launches of these generic drugs will bring in additional revenues for Dr. Reddy's Global Generics segment, which recorded sales of $1.2 billion in fiscal 2011, reflecting a year-over-year increase of 10%.
We note that while generics revenues increased 18% in North America, 19% in Russia and other CIS (Commonwealth of Independent States) markets, and 15% in India, they deteriorated 13% in Europe in fiscal 2011. In the European market, Germany was worst hit, with a 25% drop (due to a decline in the Euro currency), partly mitigated by the rest of Europe experiencing a 27% rise.
During fiscal 2011, Dr. Reddy's launched 135 new generic products, filed 107 new product registrations, and 56 drug master files (DMF) globally. At the end of fiscal 2011, total ANDAs awaiting FDA approval were 75, of which 37 were paragraph IV filings and 10 were first-to-file.
Our Take
We currently have a Zacks #2 Rank (short-term Buy rating) on Dr. Reddy's. We believe the company is in a strong position to benefit from the huge potential represented by the US generics market, as drugs with sales of about $75 billion are slated to lose patent exclusivity in the coming years.
Longer-term, we have a Neutral recommendation on Dr. Reddy's.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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