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Salix Pharmaceuticals (SLXP)
By Jason Napodano
Jan 08, 2009
SLXP) is a specialty pharmaceutical company engaged in acquiring, developing and commercializing prescription drugs used in the treatment of a variety of gastrointestinal diseases.
The company suffered a major setback in December 2007 when the FDA granted approval to three generic versions of its lead product, Colazal. This is devastating news for Salix, as Colazal was a significant contributor to both the top-and bottom-line. Moreover, Salix failed to receive approval for its tablet version of Colazal in December 2008.
We expect the coming quarters to be challenging for the company. While new product launches and new indications for Xifaxan should support a recovery in revenues in 2009, we do not expect earnings to recover prior to 2010. We maintain a Sell rating with a target price of $5.
Votorantim Celulose (VCP)
By Claudio Freitas
Jan 07, 2009
VCP). The short-term outlook for pulp prices is quite uncertain as a result of the current credit crisis.
Third quarter results were disappointing and the pulp cash production cost increased during the quarter due to the stoppage of production in the Jacarei and Conpacel units. Fourth quarter guidance is also disappointing. The recent reduction in demand in Europe and North America, along with the U.S. financial crisis, resulted in a decrease in pulp list prices all over the world.
Moreover, after the loss announced by Aracruz, the merger no longer seems to be a good idea.
St. Joe Company (JOE)
By Greg Sukenik
Jan 06, 2009
JOE) is currently focusing on increasing liquidity through the sale of non-core assets, reducing headcounts, and reducing cap-ex expenditures in response to a rapidly deteriorating residential Florida real estate market.
In addition, JOE has eliminated most of its long-term debt and opened a new $100 million line of credit. There are no signs that the housing situation will get better in the next six months and we think the worst is yet to come. Near term, we would stay away from companies with exposure to the residential building business. While we think the company is a good long-term investment due to its extensive land holdings in one of the fastest growing states, we are maintaining our near-term Sell recommendation.
The company is trading at 165x our 2009 EPS estimates.
LeapFrog Enterprises (LF)
By Steven Ralston
Jan 05, 2009
LF) is a leading provider of technology-based learning products and proprietary content. The company designs and develops educational products, as well as related interactive software and content, under multiple product platforms, including the LeapFrog, LeapPad, Leapster, and Quantum Leap brands.
Management's actions to improve long-term operating results through increased R&D and incremental marketing spending resulted in another year of negative earnings in 2007. Management expects that 2008 will be a turnaround year with new products introduced in the last two years generating sales and earnings growth.
However, turnarounds usually take longer than initial expectations. In addition, the economic weakness in the U.S. is negatively impacting spending on discretionary products and is currently a headwind for the company's progress. Therefore, the stock is rated a Sell.
American Axle (AXL)
By Paul Raman
Dec 31, 2008
AXL) is a leading supplier of driveline systems, modules and components for the light vehicle market. The company makes axles, driveshafts and chassis components for light trucks, sports utility vehicles (SUVs) and passenger cars.
The present condition of the North American automotive industry characterized by slow car sales, production cuts, excessive inventories, rising commodity costs, and market share losses of leading U.S. automakers are affecting the company negatively.
Despite the company's attempts to diversify its customer base, General Motors (GM) still accounts for about 70% of current sales and is constantly implementing production cuts. To make matters worse for AXL, it is exposed to platforms that have faced the maximum cuts. AXL's largest vehicle programs at General Motors and Chrysler account for nearly 90% of the company's total revenues.
Meanwhile, AXL has been adversely impacted by rising commodity costs. This is negatively affecting earnings by $0-$15 million annually. In fact, General Motors and other OEM customers are constantly demanding concessions from suppliers in the form of lower prices.
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