Zacks Analyst Blog Highlights: Unisys, Intel, Amphenol and Double Eagle

Zacks Analyst Blog Highlights: Unisys, Intel, Amphenol and Double Eagle

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: Unisys Corporation (NYSE: UIS), Intel (Nasdaq: INTC), Amphenol (NYSE: APH) and Double Eagle (Nasdaq: DBLE).

Here are highlights from Thursday’s Analyst Blog:

Modest Unisys Expectations

Unisys Corporation (NYSE: UIS) will release its fourth-quarter and full-year 2006 financial results on Wednesday, January 24, 2007 before the opening of trading on the New York Stock Exchange. Following the release, Unisys will host a conference call from 8:15 a.m. to 9:15 a.m. ET to discuss its financial results. We have a Hold rating on the stock and a target price of $7.

The company sees more than half of its projected margin improvement coming from cost reduction initiatives. The remaining improvement will come from global sourcing, attrition and revenue growth. Unisys has set aggressive targets in building up its offshore workforce. The company has opened a Global Sourcing center in Bangalore in 2005 and it is fully staffed. A second center is slated to open in Bangalore very soon. The company is also planning to open a third center in India in the first half of 2007.

Moreover, the focus in the Technology business is on value-added software such as ClearPath operating systems, management tools and middleware. Also, in regard to its hardware, the strategy is to move towards industry standards. Its next-generation Unisys enterprise server architecture will enable all of its enterprise server lines to run on a common architecture using Intel (Nasdaq: INTC) chips.

$81 Target on Amphenol

Amphenol (NYSE: APH) reported fourth quarter EPS of $0.85, ahead of our expectations of $0.81, due to a greater-than-expected sales increase in military/aerospace and automotive, a lower tax rate, and a decline in SG&A to sales. We are raising our FY07 EPS estimate to $3.46 from $3.34, based on the prospects for further sales and cost synergies from TCS and our expectations for second half margin expansion driven by lower commodity and materials costs. Investors should add shares of APH to their portfolio at the current price. Our target price is $81.00 per share.

When APH took over TCS, margins were a paltry 7.5%. As recently as the second quarter of this year, margins expanded to 13%. In the third quarter, TCS operating margins increased another 300 basis point to 16%. We did not get specific margins for the fourth quarter, but management stated its goal for TCS margins to converge with interconnect margins by year-end 2007. With interconnect margins currently at 21%, this implies a very large margin expansion this year of nearly 500 basis points.

DBLE’s Prospective Strength

Double Eagle (Nasdaq: DBLE) has announced a secondary offering of up to 500,000 shares of its common stock. This could raise the company approximately $11 million in additional capital that would go toward funding development drilling costs and paying off the company’s credit line. Management has categorically stated that the offering’s timing is not indicative of any positive or negative news on the ongoing Christmas Meadows exploration test. While the company recently provided an update on the test, final results are expected early next month. We have not adjusted our model yet, though it is dilutive to our estimates.

The largest capital earmark for fiscal ‘07 will be used to construct the Atlantic Rim’s development infrastructure. Compression units, powerlines and pipe must be initially in place so that the company can begin drilling and bringing on wells in late July. Overall, we expect Double Eagle to have spent approximately $15 million on Atlantic Rim infrastructure this year.

See the latest posts to the Analyst Blog by visiting http://at.zacks.com/?id=2645

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