Skyworks Solutions, Universal Forest Products, Sanofi-Aventis, Covance and Jack in the Box
CHICAGO--([ BUSINESS WIRE ])--[ Zacks Equity Research ] highlights: Skyworks Solutions (Nasdaq: [ SWKS ]) as the Bull of the Day and Universal Forest Products Inc. (Nasdaq: [ UFPI ]) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Sanofi-Aventis (NYSE: [ SNY ]), Covance (NYSE: [ CVD ]) and Jack in the Box Inc. (Nasdaq: [ JACK ]).
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 ]:
Skyworks Solutions (Nasdaq: [ SWKS ]) recently upgraded its guidance for the fourth quarter due to broad-based improvements in end markets. Revenues are now expected at $310 million, up from the prior estimate of $300 million.
Excluding stock-based compensation expenses and restructuring charges, EPS is now expected at $0.40 per share, compared to the previous estimate of $0.37. Skyworks Solutions is well positioned to benefit from the recent trends in the handset market, which are favorable for increasing the dollar content of RF components.
The company also continues to capitalize on the rapidly expanding opportunity for analog semiconductor solutions, fueled by increasing demand for smartphones, broadband access, network infrastructure and smart grid applications. We currently maintain an Outperform recommendation on the stock.
[ Bear of the Day ]:
Universal Forest Products Inc. (Nasdaq: [ UFPI ]) reported disappointing results in second quarter 2010 with EPS falling 19 cents short of Zacks Consensus. Healthy top-line growth was offset by higher cost of sales due to volatile lumber prices in the quarter.
Also, Universal's huge dependence on general market conditions and growth in end markets increase top-line risks in the event of any adverse conditions. Further, significant volatility in the cost of commodity lumber products from primary producers is problematic.
The company also derives a large portion of its sales from one single customer, which exposes it to customer concentration risks. In anticipation of a lack of positive catalysts, we downgrade the stock to an Underperform recommendation.
Latest Posts on the Zacks [ Analyst Blog ]:
Good News for Covance
Through an agreement signed with Sanofi-Aventis (NYSE: [ SNY ]), Covance (NYSE: [ CVD ]) has become its R&D partner for the next 10 years. Covance will provide drug-development services to Sanofi for payments of $1.2-$2.2 billion over the 10-year period. Additionally, Sanofi will sell two facilities to Covance located in France and the UK for $25 million. The deal is expected to close before the year-end.
Covance will also acquire chemistry, manufacturing and control services which will include pre-formulation, drug formulation, preclinical and early-stage clinical API (Active Pharmaceutical Ingredient) manufacturing and radio labeled chemistry. Subsequent to the agreement with Covance, Sanofi will have access to Covancea™s services in the areas of discovery support, toxicology, chemistry, clinical phase I a" IV among others, payment for which will increase over the next 10 years.
Covance derives its revenues from two segments, Early Development and Late-Stage Development, which generated sales of $208.2 million (annualized growth of 4.2%) and $267 million (0.3%), respectively during the second quarter of fiscal 2010. While the Early Development segment deals with preclinical toxicology, analytical chemistry, clinical pharmacology services, research products and discovery services, Late-Stage Development caters to central laboratory, phase II-III clinical development and commercialization services.
The Late-Stage Development segment suffered during the latest reported quarter due to the delay in three large phase III studies, as announced by Covance earlier. Of these, one trial commenced during the reported quarter, one was reduced in size and launched in July while the third is expected to begin enrollment next year. Lower clinical development profitability due to this delay brought operating margin to 21.2%, down 270 bps sequentially and 340 bps year over year.
We believe the deal with Sanofi will enable Covance to recoup some of the losses due to delay in some clinical trials mentioned above.
Jack in the Box to Close 40 Stores
Jack in the Box Inc. (Nasdaq: [ JACK ]) announced recently that it is planning to shut 40 company-owned underperforming restaurants before the end of its current fiscal year 2010 on October 3, 2010.
The fast-food chain plans to close the restaurants situated across 7 states, mostly in the Southeast and Texas, places hard-hit by the economic downturn. The bleak economic scenario resulted in weak labor and tight credit markets, which slashed discretionary spending.
Jack in the Box, based in San Diego, stated that it expects about $8.5 million to $9.5 million as impairment charges related to the closings and approximately $21 million to $25 million in lease-related costs for the fourth quarter of 2010.
Management believes that the closing of restaurants will benefit the companya™s future profit and improve the cash flow position, as the restaurants were running into losses. Continuous decline in traffic, stemming from rising unemployment and lower consumer spending, was the primary reason behind these losses.
Jack in the Boxa™s third quarter earnings of 50 cents were also below the Zacks Consensus Estimate of 53 cents, resulting from sluggish sales and higher overhead costs. During the quarter, the companya™s restaurants sales dropped 17.8% year over year mainly due to the companya™s strategy to sell company-owned restaurants to franchisees. In the same quarter, the company sold 50 restaurants to franchisees.
Get the full analysis of all these stocks by going to [ http://at.zacks.com/?id=2649 ].
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