Zacks Bull and Bear of the Day Highlights: SurModics, Rogers Communications, Kinder Morgan Energy, Enbridge and Benihana
CHICAGO, May 25, 2012 /PRNewswire/ -- Zacks Equity Research highlights SurModics, Inc. (Nasdaq:SRDX) as the Bull of the Day and Rogers Communications (NYSE:RCI) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Kinder Morgan Energy Partners L.P. (NYSE:KMP), Enbridge Inc. (NYSE:ENB) and Benihana Inc. (Nasdaq:BNHN).
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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:
SurModics, Inc. (Nasdaq:SRDX) second quarter fiscal 2012 adjusted earnings of $0.14 per share beat the Zacks Consensus Estimate by $0.02. The company also topped the Zacks Consensus revenue estimate. Given SurModic's strong product portfolio, we expect it to achieve fiscal 2012 guidance of $47-$51 million.
We are also pleased with the sale of the SurModics Pharmaceuticals unit, as this has allowed the company to focus on its core businesses. Performance of the company has been steadily improving since a disappointing fiscal 2010. The company took a number of corrective measures, including a change at its helm.
We believe SurModics will continue performing well going forward, and have raised our earnings estimates for fiscal 2012 and 2013. In view of these positives, we upgrade SurModics to Outperform. Our target price is $17.00.
We are downgrading our recommendation on Rogers Communications (NYSE:RCI) to Underperform following its weak financial results for the first quarter of 2012, which missed the Zacks Consensus Estimates. Rogers is currently facing tremendous pressure in all three of its business segments.
The Canadian Wireless market has become increasingly competitive, exerting headwinds on Rogers' ARPU and margins. In the previous quarter, the growth rate of the wireless data revenue slowed further. Meanwhile, the Cable segment has started facing the brunt of its competition's aggressive rollout of IPTV. The Media segment is facing continued softness in the advertisement market.
We believe huge competitive threats in all front may jeopardize the company's free cash flow and profitability in the future reporting quarters. We do not find any immediate growth catalyst for Rogers Communications.
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Kinder Morgan Trims Back Expansion
Kinder Morgan Energy Partners L.P. (NYSE:KMP) has downsized its capital outlay by 18%, from $5 billion to $4.1 billion, for the planned extension of its Trans Mountain pipeline that transfers Canadian oil to the Asian markets.
Kinder Morgan has signed 20-year contracts for approximately 510,000 barrels per day (bpd) on its pipeline with fewer shippers than anticipated, which led the partnership to increase the capacity to 750,000 bpd from the existing 300,000 bpd. Earlier, the partnership had plans to augment the capacity to 850,000 bpd.
The partnership's preliminary estimations had showed it would get adequate contracts to support such a massive expansion. But a few prospective shippers were unsuccessful in attaining their boards' approvals by the closing date, triggering the reduction.
Further, the forecast of liquids output increasing by two times from the Alberta oil sands in 10 years, backed Kinder Morgan's $5 billion expansion plan. The partnership's pipeline expansion proposal is only the second one targeted at accessing entry into the booming Asian markets. The first was the one endorsed by Enbridge Inc. (NYSE:ENB) to link Alberta oil sands with markets of Kitimat and British Columbia, at an estimated cost of $5.5 billion.
Currently, the partnership's project is countering objections from the environmental groups and a few native communities in British Columbia as well as from the Vancouver city council as it would raise the tanker traffic in the city's harbor.
Benihana Puts Itself Up for Sale
Miami-based Benihana Inc. (Nasdaq:BNHN) recently announced that it is being acquired by a private equity group Angelo, Gordon & Co.'s in a merger deal valued at around $296 million or $16.30 per share in cash. Execution of the deal will make Benihana private.
The offer price is at a 46% premium to the average closing share price for the 30-day period ended March 13, 2012 and at around 23% premium to the closing share price on May 21. On March 13, Benihana declared the evaluation of strategic alternatives which included a possible sale, in association with Jefferies & Co., in order to bolster shareholder value.
However, the completion of the deal is subject to regulatory as well as shareholders' approvals and other customary closing conditions. Moreover, there will be a 40-day period where Benihana can consider if it gets any lucrative offer from any third party, running through July 1, 2012. The possibility of a higher bid however seems negligible as Benihana has been offered an attractive multiple.
Although Benihana's growth in comps gained momentum in recent times, in its third-quarter 2012 results, Benihana's earnings per share fell short of both the Zacks Consensus Estimates and the year-ago level. Benihana management appears to be content with the offered cash premium as it believes Angelo has justified the value of the Benihana brand.
This is not the first time that Benihana tried to sell itself. Earlier, in July 2010, Benihana had considered the possible sale option under its strategic alternatives review program. This leading Asian themed Japanese steak-and-sushi eatery, operates 95 units spread across three concepts namely Benihana restaurants, Haru sushi restaurants and RA Sushi restaurants. The distinctive concept as well as growing demand for quality Japanese dining made it a lucrative acquisition target.
If executed, we believe that after the deal Benihana will be handled well by its new owner Angelo Gordon's Private Equity Group. The group makes sizable investments in the range of $50-$500 million in sectors like financial services, consumer/retail, and healthcare.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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