October 2, 2008
Zacks Analyst Blog Highlights: El Paso Corp., CRA International, Inc., Broadcom Corp., Verizon Communications Inc. And Sprint Nextel Corp.
Mark VickeryWeb Content Editor
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: El Paso Corp. (NYSE: EP), CRA International, Inc. (Nasdaq: CRAI), Broadcom Corp. (Nasdaq: BRCM), Verizon Communications Inc. (NYSE: VZ) and Sprint Nextel Corp. (NYSE: S).
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Here are highlights from Tuesday's Analyst Blog:
El Paso Corp. a Strong Buy
El Paso Corporation (NYSE: EP) is a major player in both the natural gas transmission and exploration and production businesses within the energy space. The company has organized its operations around regulated and non-regulated businesses.
We are maintaining our Buy recommendation on El Paso Corp. as the outlook from both its core pipeline and E&P businesses have strengthened. Its pipeline businesses boasts an industry-leading $8 billion in project backlogs with exposure to major gas consuming and producing regions and an impressive growth profile relative to its peers. Its E&P business continues to improve from a cost stand point from the effects of the asset high grading efforts via the People's acquisition.
CRA International Now a Sell
We are downgrading our rating on business and legal consultancy company CRA International (Nasdaq: CRAI) from Hold to Sell, following the release of third-quarter financial results that fell well short of Street expectations. The shortfall marks the second such disappointment in the last three quarters. As such, we anticipate that investors will demand evidence that the management has properly addressed the Boston, Massachusetts-based company's operational problems before affording a higher multiple to CRAI shares.
The shares declined 27% following the release of the disappointing third-quarter results. However, we believe that the stock may be subject to further downside risk, and we do not expect material short-term price appreciation in light of the operational challenges facing the company. While it is true that CRAI may ultimately reap some rewards from the current upheaval in the financial markets, we do not expect a significant positive impact in the near-term.
Broadcom Wary of Slowdown
Broadcom (Nasdaq: BRCM) is a fabless company, designing and marketing semiconductor components that network voice, video, and data traffic for applications in digital cable and satellite set- top boxes, cable and digital subscriber line (DSL) modems, high- speed local area networks (LANs), metropolitan area networks (MANs), long-haul networks, wireless communications, server solutions, and many more areas. The system-on-chip solutions provided by Broadcom inexpensively integrate analog, digital, and mixed signal circuitries that address the requirements of a broad clientele.
Verizon's (NYSE: VZ) licensing agreement with Broadcom (as a remedy to the ITC ban) may compel Sprint-Nextel (NYSE: S) to enter into a similar agreement. The royalties paid by Verizon would equate to approximately 4% of Broadcom's revenue, and the gross margin impact could be as much as a 350 basis point addition to the company's long-term GAAP gross margin target of 50%-52%.
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