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Jackson Securities, LLC Equity News

Research for the Prudent Investor May 1, 2007

Brian Bolan
Director of Research;
312-253-0578; BBolan@JacksonSecurities.com

A review of research published in April and updated coverage list

Consumer Staples and Retail Research -- Charlie Georgas, CFA

04/17/07 Coca-Cola 1Q07 Earnings Review – KO – $51.57


The global procurement initiative for commodity inputs and the recently released U.S. Agriculture
Department report (90 million acres of corn predicted) should help alleviate some cost pressure, but retail
pricing in North America is posing heightened levels of risk. We continue to believe that line extensions
(Coca-Cola Zero and Diet Coke Plus) will invigorate, and not harm, the trademark Coca-Cola and Diet
Coke brands, and market share numbers in Q1 are holding up – Diet Coke and Coca-Cola Classic gained
share while Coca-Cola Zero surpassed a one point share in the category. We reiterate our “Buy” on KO
with a price target of $50.

04/25/07 Colgate-Palmolive 1Q07 Earnings Review – CL - $67.44


Our belief in the idea of low elasticity in CL’s specialty pet-food products – as evidenced by stable
volume amid 4% price increases at the beginning of ’06 and ’07 for Hill’s Science Diet – has even more
conviction now in the aftermath of the recent industry-wide pet food recall. Hill’s voluntary recall of two
feline products (0.5% of Hill’s annual sales) has not resulted in any volume weakness in April of ’07, and
the product line maintained its “most recommended” status within the U.S. veterinary channel.
Innovative, higher-margin products are in the pipeline and the fundamentals appear strong. We are
retaining our “Buy” on CL with a price target of $67.

04/25/07 Anheuser-Busch 1Q07 Earnings Review – BUD - $50.90


Grupo Modelo’s new distribution venture with Constellation Brands (STZ) and the new alliance
with InBev should help offset competitive pressure from imports, but overall trends are not pretty –
volume down 3% in April and on-premise down mid-single digits in 1Q (lower traffic in casual dining).
The high correlation to weather patterns is not very promising at this point, and the risks remain elevated.
We are maintaining our “Hold” on BUD with a price target of $45.

Important Disclosures
Jackson Securities, LLC does or seeks to do business with companies covered in its
research reports. As a result, investors should be aware that the firm may have a conflict
of interest that could affect the objectivity of this report. Investors should consider this
report as only a single factor in making their investment decisions. Please also refer to
the important disclosures found on pages 5 thru 6. Analyst Certification is found on
page 5.
04/27/07 Lance 1Q07 Earnings Review – LNCE - $22.93
The private-label business, representing 37% of sales, is eligible for price adjustment with Wal-
Mart (WMT) next month – potentially reducing some margin pressure from grain-based commodities,
mainly edible oil and wheat (up 180 basis points over last year). Direct store distribution (DSD)
upgrades, such as Motorola (MOT) handheld devices, and better coverage in place in the forward
commodity markets have mitigated some risk factors, but we still see weakness in the product innovation
pipeline. We view the current risk/reward profile as balanced, thus we are retaining our “Hold” on LNCE
with a price target of $20.

Internet Research -- Brian Bolan, Director of Research

04/18/07 Yahoo! 1Q07 Earnings Review – YHOO – $32.09


A review of the earnings release and conference call for the search giant that disappointed
investors. The topline came in well below out estimate and earnings of $0.10 were a penny below the
consensus. We speculated that the often silent Semel, higher costs and lighter revenues could be a
harbinger of yet another shake up at the top at Yahoo!. We maintained our “Hold” rating with a price
target of $26.

04/19/07 Netflix 1Q07 Earnings Review – NFLX – $21.70


A decent quarter was really turned upside down due to the lowered guidance for future revenue
and subscribers. Revenue of $305M for the quarter topped our estimate and EPS of $0.14 was in line with
our estimate. Competition from the Blockbuster Total Access plan was the reason for the lowered
guidance. We immediately lowered our subscriber estimate by about 10%, and notably reduced the 2Q07
subscriber gain by more than 300K. We maintained a “Hold” rating and lowered our target price to $21
from $23.

04/20/07 Google 1Q07 Earnings Review – GOOG – $471.56


Many in the investment world summarized Google’s quarter with one word, ‘blowout.’ Google
earned $3.68 per share, well above our aggressive $3.52 estimate and the street consensus of $3.30. The
top line came in above our expectations as well, and needless to say was much higher than Wall Street
expected. We were happy with the results, yet still frustrated by the tax rate and specifically the guidance
the company had issued on that line item. Growth outlook is still very much intact at Google, as we
maintained our “Buy” rating and target of $560.

04/26/07 Blue Nile updating estimates – NILE – $46.43


We raised our estimates for Blue Nile to be more in line with guidance and consensus. We expect
that orders will come in higher than we had originally anticipated but we also moved up SG&A expenses.
We also adjusted our share count figure to more reflect a possible slower buy back thanks to the rising
stock price. That same rising stock price made us begin to question the valuation on the stock as we
maintained our “Hold” rating and price target of $40.00.

04/30/07 Yahoo! updating estimates – YHOO – $28.04


After the disappointing quarter for Yahoo!, we decided to lower our estimates on the top and
bottom line as they were simply too aggressive. We also discussed the purchase of the remaining 80% of
Right Media that the company didn’t already own. With the stock still sitting above our target price, we
reminded investors that Yahoo! is a core Internet holding and while it may be overvalued, it should not be
bought or sold based on price targets alone.
Telecom, Media and Lifestyle Research -- Greg Gorbatenko, CFA, CPA (inactive) CMA

04/10/07 Qwest Earnings Review – Q – $8.88


Qwest won a major contract with the GSA, but we believe the announcement was a little overdone in the
stock price. We see three reasons why we would recommend against investing in Qwest at this point:
revenue growth, debt, and valuation.

04/19/07 Motorola 1Q07 Earnings Review – MOT – $17.33


Motorola came in pretty much in line with modified expectations. Strength in Connected Home and
Networks helped alleviate the weakness in Handsets, where the company lost global market share. We continue to
rate the stock a “Buy” based on valuation..

04/24/07 AT&T 1Q07 Earnings Review –T – $38.72


AT&T put up some strong numbers, showing a lot of progress on the integration of old AT&T and AT&T
Wireless. Additionally, the acquisition of BellSouth continues to show promise based on expanding margins. The
company has proven a core competency in target digestion, but the valuation still appears lofty to us; thus, we are
maintaining our “Hold” rating on the stock.

04/26/07 Lifetime Fitness 1Q07 Earnings Review –LTM – $51.40


Lifetime Fitness (Buy) beat on revenues and EPS and raised guidance for 2007 EPS. Everything pretty
much seems to be operating as planned. We believe the investment thesis is based on strong industry underpinnings
coming from 1) market share opportunity stemming from the problems at Bally Total Fitness and 2) growth
potential in the male dieter segment of the market as evidenced by NutriSystem.

04/30/07 Verizon 1Q07 Earnings Review –VZ– $38.18


Verizon beat on revenues and met on EPS expectations. The company also made no noticeable changes to
2007 guidance. Our sentiment on all of this is that the company is being conservative since the underpinnings look
pretty good, specifically, FiOS and wireless. We continue to like the stock based on strategy execution and peer
group valuation.
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Disclosures:

Analyst Certification
I, Brian Bolan, Charlie Georgas and Greg Gorbatenko hereby certify that the views expressed in
this research report accurately reflect my personal views about the subject securities and
issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly,
related to the specific recommendations or views expressed in this research report. I may be
compensated in part based on the overall profitability of Jackson Securities, LLC, which includes
earnings from investment banking and all other aspects of the firm’s business.

Conflicts of interest:
Neither Jackson Securities nor any of its publishing analysts or their immediate family members
has a position in the securities described herein.

Compensation:
• The research analyst has not received compensation based upon investment banking
revenues or from the subject company in the last 12 months.
• Jackson Securities has not in the last 12 months managed or co-managed a public
offering of securities, received compensation for investment banking services from the
subject company or any compensation for products or services other than investment
banking
• Jackson Securities will seek investment banking compensation from the subject company
in the next 3 months.

Position as Officer or Director:


Neither the research analysts nor members of their immediate households occupy positions as
an officer or director with the company/companies mentioned in this report.

Market Making:
Jackson Securities does not make a market in this stock

Explanation of Ratings:
Buy - Expected 12-month absolute performance of +10% or higher than the market price at which time
the rating was issued.
Hold - Expected 12-month absolute performance of +5% to –5% from the price at the time the rating was
issued.
Sell - Expected 12-month absolute performance of –10% or lower than the market price at which time the
rating was issued.

Distribution of Ratings:
Jackson Securities, LLC has a distribution of ratings among its coverage universe as follows:

Buys – 51.4% (18 of 35 active recommendations)


Holds – 45.7% (16 of 35 active recommendations)
Sells – 2.9% (1 of 35 active recommendations)

Jackson Securities has provided investment banking services within the previous 12 months with the
following percentage of the companies they have rated:
Buys – 0.0% (0 of 35 active recommendations)
Holds – 0.0% (0 of 35 active recommendations)
Sells – 0.0% (0 of 35 active recommendations)

Risks: General economic conditions, economic slowdown/recession, adverse industry news.

Other Important Disclosures and Disclaimers

Disclaimer: This communication is neither an offer to sell nor a solicitation of an offer to buy any
securities mentioned herein. This material should not be construed as an offer to sell or the solicitation of
an offer to buy any securities mentioned herein in any jurisdiction where such an offer or solicitation
would be illegal. We are not soliciting any action based on this material. This document is for general
information only, and it does not constitute a personal recommendation or take into consideration the
particular investment objectives, financial condition or financial needs of any clients. Before acting on any
advise or recommendation in this research report, clients should consider seek professional advice. Past
performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original
capital may occur.

The information contained herein has been obtained from sources that we believe to be reliable, but we do
not guarantee its accuracy or completeness. Any opinions expressed herein are statements of our
judgment on the date appearing on this material only and are subject to change without notice. We
endeavor to provide updates on a reasonable basis of the information discussed in research reports, but
there may be reasons which prevent us from doing so.

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