Baird upgraded Optimer Pharm (NASDAQ: OPTR) to Outperform from Neutral and raised its target to $13 from $8 citing the decidedly positive data from the OPT-80 trial.
Banc of America upgraded Quest Diagnostics (NYSE: DGX) to Buy from Neutral on valuation and believes management has set expectations well.
Credit Suisse views Jacobs Engineering (NYSE: JEC) as a high quality name given the quality of management, execution track record, and relationship business model. Shares were upgraded to Outperform from Neutral.
Horizon Lines (NYSE: HRZ) was upgraded to Overweight from Equal Weight at Stephens.
William Blair raised Quest Diagnostics (NYSE: DGX) to Outperform from Market Perform. The firm believes that the long-term fundamentals of the clinical laboratories sectors are still strong.
UBS upgraded Massey Energy (NYSE: MEE) to Buy from Neutral on valuation.
ArthroCare (NASDAQ: ARTC) was upgraded to Buy from Hold by Lazard, since the firm expects a small restatement while they believe a large restatement is priced into the shares.
Arch Coal (NYSE: ACI) was upgraded to Buy from Neutral by UBS.
Aetna (NYSE: AET) was initiated with a Buy by Banc of America, which believes the company will experience industry-leading member growth.
Banc of America initiated Wellpoint (NYSE: WLP) with a Buy rating, as the firm expects the shares to rebound from near trough valuations.
Wachovia (NYSE: WB) was reinitiated by Friedman Billings with an Underperform rating, as the firm expects the company to incur higher credit losses than the Street expects due to its outsized exposure to residential real estate.
Six Flags (NYSE: SIX) was started with an Above Average rating by Caris.
MOST NOTEWORTHY: Pfizer, Dell, Quest Diagnostics, and Societe Generale were today's noteworthy upgrades:
Lehman upgraded Pfizer (NYSE: PFE) to Equal Weight from Underweight on valuation.
Friedman Billings raised Dell (NASDAQ: DELL) to Outperform from Market Perform, citing expectations for improved margins next quarter, and valuation.
Quest Diagnostics (NYSE: DGX) was upgraded to Outperform from Neutral by Credit Suisse, which cited valuation.
Lehman upgraded shares of Societe Generale (OTC: SCGLY) to Overweight from Underweight to reflect a potential takeover by BNP Paribas and limited downside.
OTHER UPGRADES:
Bayer (OTC: BAYRY) was raised to Overweight from Equal Weight by Lehman.
Deutsche Telekom (NYSE: DT) was upgraded to Hold from Sell by Citigroup.
Public Storage (NYSE: PSA) was raised to Buy from Hold by Deutsche Bank.
UBS raised Entergy (NYSE: ETR) to Buy from Neutral.
MOST NOTEWORTHY: AeroVironment, American Oriental and Intel were today's noteworthy initiations:
Suntrust initiated AeroVironment (NASDAQ: AVAV) with a Buy rating and $32 target and expects AVAV's market leadership in unmanned aerial systems and increased effort in the high altitude to drive strong organic growth.
Jefferies believes American Oriental (NYSE: AOB) is capable of making sizable acquisitions given its strong cash position and finds the valuation attractive at current levels. The firm started shares with a Buy rating and $20 target.
Intel (NASDAQ: INTC) was initiated with a Neutral rating and $30 target at Baird on valuation.
OTHER INITIATIONS:
Equinix (NASDAQ: EQIX) was initiated with a Market Perform rating at Wachovia.
MOST NOTEWORTHY: Gen-Probe, Monster Worldwide, LabCorp and Quest Diagnostics were today's noteworthy initiations:
Deutsche Bank initiated shares of Gen-Probe (NASDAQ: GPRO) with a Buy rating and $78 target and expects the company's broad product portfolio in Clinical Diagnostics and Blood Screening to drive growth.
CIBC initiated Monster Worldwide (NASDAQ: MNST) with a Sector Performer rating, as they believe their macro concerns are more important than the company's intermediate-term prospects and its position within the global recruiting market.
William Blair views the valuation of LabCorp (NYSE: LH) as compelling given the company's growth outlook. The firm started shares off with an Outperform rating.
William Blair also initiated Quest Diagnostics (NYSE: DGX) with a Market Perform rating, and prefers a wait-and-see approach as the company's diversification strategy unfolds.
MOST NOTEWORTHY: BEA Systems, Nokia, Medco Health, Quest Diagnostics and PetSmart were today's noteworthy downgrades:
Citigroup downgraded shares of BEA Systems (NASDAQ: BEAS) to Hold from Buy on valuation following the $17/share offer by Oracle (NASDAQ: ORCL) as they think a public bidding war for the company is unlikely.
ABN Amro downgraded shares of Nokia Corporation (NYSE: NOK) to Hold from Buy on valuation and believes above consensus Q3 results are already priced into shares.
Wachovia downgraded Medco Health Solutions (NYSE: MHS) to Market Perform from Outperform on valuation.
The firm also downgraded Quest Diagnostics (NYSE: DGX) to Market Perform from Outperform, as they believe the prospects from stabilizing volumes and cost savings are reflected in valuation and Street estimates.
Credit Suisse downgraded shares of PetSmart (NASDAQ: PETM) to Neutral from Outperform citing aggressive pricing at Petco, accelerating growth initiatives, limited visibility around expense management, and lack of consistent results.
OTHER DOWNGRADES:
Methanex Corporation (NASDAQ: MEOH) was downgraded to Sector Underperformer from Sector Performer at CIBC.
Quest Diagnostics, which provides laboratory services to roughly 50% of the nation's doctors and hospitals, fell out of favor after it lost a large client, amid building price pressure.
Slowing growth, and an above-average sector valuation also were data points offered by those making the bearish case.
The bullish case, on the other hand, argues that Quest's recent cost cutting initiatives, strong cash flow, and growing demand for sophisticated medical tests (bolstered by that old standby, the aging Baby Boomer generation) suggest solid long-term growth prospects for DGX. Quest is trading around $55 with a P/E of 19.
(Note: Technical analysis agnostics stop reading here. All others, continue.)
From a technical analysis standpoint, Quest's chart appears to have formed a double-bottom around $47.90 in March/April and May/June.
Investment Category: Quest is a moderate-risk stock not suitable for low-risk investors. The Reuters 2007 and 2008 earnings per share consensus estimates for DGX are $2.87 and $3.25, respectively.
MOST NOTEWORTHY: Old Dominion Freight (ODFL), Jamba (JMBA), AMD (AMD), Orbitz Worldwide (OWW) and Quest Diagnostics (DGX) were today's notable initiations:
Baird is positive on Old Dominion's (NASDAQ: ODFL) growth opportunities, valuation, 2008 improving truck fundamentals, and a potentially seasonally stronger Q4, starting shares with an Overweight rating and $36 target.
Merriman initiated Jamba (NASDAQ: JMBA) with a Buy rating, as the company aggressively expands its store base beyond California.
BMO Capital believes AMD (NYSE: AMD) may lose the Intel platform integrated graphics market, and sizeable Intel platform discrete graphics market share. The firm initiated AMD shares with an Underperform rating and $10 target.
Soleil has concerns regarding Orbitz Worldwide's (NYSE: OWW) decelerating growth and poorer business mix vs. competitors and started shares with a Hold rating and $13 target.
Credit Suisse initiated Quest Diagnostics (NYSE: DGX) with a Neutral rating and $61 target, citing the recent UnitedHealth (UNH) contract loss, slowing growth, and valuation for its Neutral rating...
Diagnostic medical tests guide physicians through the process of diagnosing diseases and measuring the progress of recovery. The leading U. S. provider of diagnostic testing services is a Lyndhurst, New Jersey outfit that performs personal health testing on more than 150 million patients a year. It was the first laboratory in the country to achieve ISO 9001 certification.
Quest Diagnostics (NYSE: DGX) provides diagnostic testing services to the healthcare industry. Offerings include routine blood tests, pap tests, urinalyses, pregnancy tests, asthma and allergy tests, gene-based tests and tests for drugs of abuse. It also provides anatomic pathology services, testing for clinical trials, and risk assessment services for the life insurance industry. Through its Nichols Institute Diagnostics subsidiary, the firm manufactures and markets diagnostic test kits and systems to hospitals, clinical laboratories and dialysis centers. Quest operates more than 2,000 sample collection centers, 30 primary labs and 150 rapid response labs throughout the US and in Mexico and the UK. The firm has testing contracts with such health insurers as Aetna (NYSE: AET) and Cigna (NYSE: CI).
The company surprised the Street earlier in the week, when it reported Q2 EPS of 73 cents and revenues of $1.64 billion. Analysts had been looking for 68 cents and $1.61 billion. Management also guided FY07 EPS to $2.80-2.95 ($2.80 consensus) and FY07 revenues to $6.6-6.7 billion ($6.61B consensus).
Word is that there's more than one bid out for the satellite radio company. We know about the merger agreement with Sirius Satellite Radio Inc's (NASDAQ: SIRI), so who's the other party? Or, is there another party? Some are convinced it's just talk. No names are even floating around. But for XM to walk away from Sirius would cost them a $175M break-up fee. They'd have to really be serious about another offer to do that.
In May, Robert L .Chapman of Chapman Capital, the "activist investor", said Building Materials Holding Corp. should consider selling all or parts of itself. Then he upped his stake to 8.1% in the residential construction services provider. Now comes word that the company may have hired, or be in the process of hiring, a strategic advisor.
Looks like we still might have a summer swoon, and if we do, then many of the stocks on your watch list might pop up as buy opportunities. One more stock you might want to add to that list is Quest Diagnostics Inc. (NYSE: DGX), the world's leading clinical lab. It operates 2,000 patient services centers where samples are collected, along with about 30 primary labs and 150 rapid response labs throughout the US and in Mexico and the UK.
Investment ideas come from many different avenues. This one came to me because I donated blood this week. Not everyone is eligible to donate and only 5% of that group actually do. Our whole blood supply is supported by very few people. I started thinking about the cost of collecting, maintaining and distributing the blood and how quality control is done. According to the PBS series Red Gold: The Epic Story of Blood: "Currently, the average base price of a unit of RBCs [red blood cells] is in the range of $100-$160, but will increase as more sophisticated testing for transmissible diseases (e.g., HIV and viral hepatitis) are introduced." The news of globe-trotting tuberculosis patient Andrew Speaker also brought the the idea of labs and screening to mind.
Quest runs many different tests and screens for many different things. Ironically, now I'm screening the (blood) screener, and it did not take long to discover there was some value here. You can see some of my often repeated criteria; low P/S, fair P/B, pays a dividend (wish it was higher), not much debt, good cash-flow, and ROE is solid and higher than the P/E.
Price-to-earnings P/E: 17.69 (TTM)
Price-to-sales P/S: 1.55 (TTM)
Price-to-book P/B: 3.13 (TTM)
Price-to-cash-flow P/CF: 9.95 (TTM)
Return-on-equity ROE: 20.2 (TTM)
Long Term Debt-to-Equity (MRQ) 0.5
Dividend Yield 0.82%
Quest has been building shareholder value for quite some time and the stock price is nearing a two year low, and 20%+ below its all time high set last year.
Bernstein upgraded the semiconductor sector to Overweight form Market Weight on expectations that utilization will rise starting in Q2. The firm upgraded ASML Holding NV (NASDAQ: ASML) to Outperform from Market Perform and Infineon Technologies (NYSE: IFX) to Market Perform from Underperform.
UBS upgraded Quest Diagnostics to Buy from Neutral, citing Laboratory Corporation Of America Holdings' (NYSE: LH) contract renewal with Cigna HealthCare, which should ease concerns regarding deteriorating pricing.
Fannie Mae was upgraded to Outperform from Market Perform at Friedman Billings, citing improving fundamentals, better business mix and the possibility the company reports current financials in the next 12-18 months.
Private equity firm Welsh, Carson, Anderson and Stowe has been around since the late 1970s and has a strong background in the medical space.
Well, back in 2003, the buyout firm purchased AmeriPath for $658.8 million. The developer of cancer-diagnostics has grown through some deals and posted sales of $800 million last year.
Now Welsh Carson is selling the company to Quest Diagnostics (NYSE: DGX) for $2 billion (if you include the $770 million in debt). To get the deal done, Quest will be using the $2.5 billion in financing from Morgan Stanley (NYSE: MS).
The transaction will not have much of an impact on Quest, at least in the short-run. But the growth opportunity does look good for AmeriPath, and Quest will pick up leadership in dermatopathology and anatomic pathology -- which are growing quickly.
On the news, Quest's stock fell 4.70% to $51.76.
Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
Jim Cramer reviewed a last Fallen Angel on CNBC's MAD MONEY tonight: Quest Diagnostics (NYSE:DGX). He owns it in his trust, for disclosure. He said that Quest losing Oxford's business (UnitedHealth Group NYSE:UNH) took the stock down under $49. The company had already announced the news a month earlier. He isn't minimizing the business loss, or so he says, because it was $400 million of their $6 billion in total business. The company beat last week by $0.05 on EPS, but lowered guidance. He said it traded up $1.00 because the street is assuming it is conservative. He thinks it could earn $3.10 and they are low-balling estimates at $2.95. It closed at $52.25 and is now up at $52.90 in after-hours. J.P.Morgan just raised it and a broker luncheon on it last week was over-attended.
Cramer interviewed the CEO of Jones Soda (NASDAQ:JSDA), Peter van Stolk, before closing down MAD MONEY until tomorrow. It lost Target business, but he said that is only 2% of their business. The company doesn't use high-fructose corn syrup, they use cane sugar. Cramer doesn't think it has finished rising. The company won't be announcing any new product data until the first week of March. Cramer said it was up $1.00, but he said let it pull-back and then you can buy it since it was up so much today. This after-hours pop before it came in is another yearly high, and the company had a $376 million market cap as of the close. This stock, if it meets the $0.14 estimate in 2007 without beating estimates, then it now trades at 100-times December 2007 fiscal EPS projections. He's been behind this one before (back on December 21 he called the next Hansen Natural [NASDAQ:HANS]), on more than one occasion.
Jon Ogg is a partner in 24/7 Wall St., LLC; he does not own securities in the companies he covers.
MOST NOTEWORTHY: The Kroger Co (KR) and Quest Diagnostics Inc (DGX) were today's most notable upgrades:
Bank of America upgraded The Kroger Co (NYSE: KR) to Buy from Sell with a $29 target. Due to streamlined distribution and reduced SG&A expenses having closed the productivity gap with Wal-Mart Corp (NYSE: WMT), the firm believes Kroger is well positioned to accelerate growth and modestly increase operating margins.
JP Morgan upgraded shares of Quest Diagnostics Inc (NYSE: DGX) to Overweight from Neutral as they not only believe the company's results will outperform expectations over the next few quarters, but that management will become more aggressive in the acquisitions market.
OTHER UPGRADES:
Sterne Agee upgraded Coast Financial Holdings Inc (NASDAQ: CFHI) to Hold from Sell, with an $8.50 target.
Goldman Sachs upgraded shares of Nova Chemical Corp (NYSE: NCX) to Neutral from Sell, with a $12 target, citing the potential sale of Nova's styrene business.
Citing the possibility of a merger with Abitibi-Consolidated Inc (NYSE: ABY), Bowater Inc (NYSE: BOW) was upgraded to Neutral from Sell at Bank of America and to Buy from Hold at Soliel Securities.
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Jim Cramer reviewed a last Fallen Angel on CNBC's MAD MONEY tonight: Quest Diagnostics (NYSE:
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