Message #1 From:
Stock News Bot Date: March 30, 2007 03:00:00 AM
EON News Zacks Analyst Blog Highlights: E.On, Endesa, Enel and Colgate-Palmolive.
CHICAGO--(BUSINESS WIRE)--Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: E.On (NYSE: EON), Endesa (NYSE: ELE), Enel (NYSE: EN) and Colgate-Palmolive (NYSE: CL).
E.On (NYSE: EON) reported solid fourth quarter and full-year 2006 results, which were in-line with our expectations. The company continues to realize cost savings across the board, and the recent inclusion of its Eastern European operations has helped boost profitability in 2006.
While the company continues perform well, it continues to run into issues in relation to its bid for Spain’s Endesa (NYSE: ELE). The most recent being Enel’s (NYSE: EN) acquisition of control of over 20% of Endesa’s stock at a price higher than E.On s offer price. Enel and Acconia’s opposition to E.On’s bid does not bode well for its current offer, and E.On has again raised its offer price to 40 per ADR [American Depositary Share]. We continue to rate shares of E.On a Hold at this time. Also, we have a six-month target price of $46.25, which is 6x our 2007 EBITDA [earnings before interest, taxes, depreciation and amortization] estimate.
We remain concerned about the effects of higher energy costs, rising CO2 emission credits, and derivative contracts which have had a negative effect on the company’s margins in the past and are expected to have negative effects in the future as well. We remain optimistic about the closure of the Endesa acquisition and the positive effects it will have in terms of spread of E.On’s business in Europe, although a resolution to this situation may take longer than we previously anticipated.
Costs Beginning to Affect Colgate
Colgate-Palmolive (NYSE: CL) has had a stellar long-term growth record. The company’s tight financial controls and history of new product innovations coupled with efforts to enhance shareholder value through share repurchases and dividend increases support a positive long-term view on the stock. However, intensifying competition in Europe, rising raw material/fuel costs, and the costs related to the implementation of the restructuring plan remain concerns. Hence, a Hold rating is recommended.
The competitive dynamics in the household products industry are changing, reflecting a change to a focus on gaining market share from the earlier emphasis on cost savings and manufacturing efficiencies. As a result, the costs have increased and earnings growth has slowed. Given recent industry trends, it should not come as a surprise that the funds generated from cost-cutting efforts under the recently announced four-year restructuring plan will be reinvested into advertising and new product development.
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