Business & Finance
Business and Finance
Business and Finance 
Thu, January 8, 2009
Zacks Bull & Bear of the Day Highlights: China Life Insurance, Salix Pharmaceuticals, ArcelorMittal, AK Steel and BHP Billiton
CHICAGO--([ BUSINESS WIRE ])--Zacks Equity Research picks China Life Insurance (NYSE: [ LFC ]) as Bull of the Day and Salix Pharmaceuticals (Nasdaq: SLXP) as Bear of the Day. In addition, the analysts at Zacks Equity Research discuss the latest on ArcelorMittal (NYSE: [ MT ]), AK Steel Holdings (NYSE: [ AKS ]) and BHP Billiton (NYSE: [ BHP ]).
Full analysis of all these stocks is available at: [ http://at.zacks.com/?id=2678 ]
Bull of the Day
China Life Insurance (NYSE: [ LFC ]) is scheduled to release its FY08 financial results on March 26, 2009. 1H08 results were disappointing due to the stock market decline.
Despite growing competition as well as volatile capital market, China Life seems to be in a better position than its peers due to the current regulatory environment and its geographical positioning. Further, it has not yet successfully completed its conversion to higher margin products and its current valuation (more so after the recent sell-off) does not fully reflect its growth prospects, which we think have further improved in view of the China's stimulus package, as also the regulator's decision to allow the insurers to invest directly in the infrastructure projects.
We maintain our Buy recommendation on the shares. Based on our FY08 earnings estimate per ADS, the company is trading at 29.1x, which is much higher than the industry median. Our target price of $54.00 per ADS is based on the company selling in line with or above the insurance industry as a whole, and we have set a target P/E of approximately 31.8x our FY08 earnings estimate.
Bear of the Day
Salix Pharmaceuticals (Nasdaq: 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.
Recent Analysis from the Analyst Blog
Signs Steel May Have Bottomed
A Wall Street Journal article published today (1/7/09) talks about recent efforts of steel producers around the world to open up select mills, in a sign that the market for steel may have bottomed.
From their mid-2008 highs, steel and iron ore prices have slipped 40% as a weakening global economy and financial crisis has slowed demand for cars, houses and other durable goods. However, there are many factors that suggest that this commodity, so heavily correlated to economic activity, may have bottomed and may gain steam in 2009.
Since the decline in global steel prices, producers have been quick to cut production. Several global steel/iron ore producers such as ArcelorMittal (NYSE: [ MT ]), AK Steel Holdings (NYSE: [ AKS ]), BHP Billiton (NYSE: [ BHP ]) and Baosteel Group have cut 2009 production by 25-30%, hoping to stem further price deterioration.
Producers have been opening mills back up selectively, and although this suggests the start to a revitalizing market, in the near term it is probably a function of lower supplies rather than a pickup in demand.
Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: [ http://at.zacks.com/?id=2649 ].
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About the Analyst Blog
Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today by visiting [ http://at.zacks.com/?id=2677 ].
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at [ http://at.zacks.com/?id=4582 ].
Visit [ http://www.zacks.com/performance ] for information about the performance numbers displayed in this press release.
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.