Zacks.com Analyst Blog features: California Pizza Kitchen Inc. (Nasdaq: CPKI), The Allstate Corp. (NYSE: ALL), Prudential Financial Inc. (NYSE: PRU), Micromet Inc. (Nasdaq: MITI) and AstraZeneca (NYSE: AZN).
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Here are highlights from Wednesday’s Analyst Blog:
Earnings Preview: California Pizza Kitchen
California Pizza Kitchen Inc. (Nasdaq: CPKI), a leading casual dining restaurant chain, is slated to release its third quarter 2010 results on Thursday, November 11, after market close. The current Zacks Consensus Estimate for the third quarter is 19 cents, representing an annualized negative growth of 22.1%.
With respect to earnings surprises, California Pizza has matched the Zacks Consensus Estimate three times and has outperformed it once in the trailing four quarters. The average earnings surprise was a positive 4.35%. This implies that the company has beaten the Zacks Consensus Estimate by the same magnitude over the last four quarters.
The casual dining operator now expects its third quarter earnings in the range of 17 cents to 19 centsper share. Comparable-store sales are projected between negative 1.0% and positive 1.0% in the third quarter.
The company remains on track to open two international full service franchised restaurants, one domestic franchised restaurant and four company owned full service restaurants in third quarter 2010.
Estimate Revision Trend
Estimates have not budged in the last 30 days, implying that the analysts do not see any meaningful catalyst for the time being. The current Zacks Consensus Estimate is 61 cents for 2010, reflecting a year-over-year negative growth of 20.3% and 72 cents for 2011, reflecting a year-over-year growth of 17.4%.
Agreement of Estimate Revisions
There has been no movement in estimates by the analysts regarding their outlook for both third and fourth quarter of 2010 as well as for 2010 and 2011 on California Pizza Kitchen’s earnings, over the last 30 days, due to the lack of any meaningful catalyst to drive the estimates upward or downward.
Magnitude of Estimate Revisions
There has been no change in the last 90 days in the earnings estimate of 19 cents, 61 cents and 72 cents for the third quarter, fiscal 2010 and 2011, respectively, as seen from the magnitude of the Consensus Estimate trend. Therefore, the analysts expect the company to report in line.
We expect California Pizza Kitchen to provide third quarter earnings in line with the Zacks Consensus Estimate.
California Pizza Kitchen has implemented several sales-building programs to revive its top-line growth and falling comparable-store sales. These initiatives include new menu offerings such as Small Cravings menu, a new wine list featuring over 30 distinctive wines, a centralized Call Center to serve customers’ off-premise dining orders, as well as a catering program.
The company also intends to focus on operational efficiencies in order to drive restaurant margins. The financial condition of the company is also sound with debt free balance sheet.
We remain cautious on the stock as comparable-store sales and traffic have sagged, given that budget-constrained consumers are trading down to lower-priced dining options. Additionally, competition among casual dining restaurants is expected to remain fierce with respect to price, service, location and concept in order to drive traffic, which may adversely affect California Pizza Kitchen’s restaurant operating margins and profits.
Accordingly, we have a Zacks #3 Rank, (short-term Hold rating). We are also maintaining our long-term Neutral recommendation on the stock.
Allstate to Execute $1B Stock Buyback
After seeking approval from its board, on Tuesday, home and auto insurer, The Allstate Corp. (NYSE: ALL) announced its intention to repurchase its common stock worth $1 billion by the end of March 2012. The stock buyback program may be conducted at intervals depending upon market conditions primarily through open market purchase.
Despite the economic turmoil in the last couple of years, the company has been working vigorously to tame its liquidity and capital position in an efficient manner. Since 1995, Allstate has returned more than $28 billion to shareholders through dividends and share repurchases.
Further, with managed investment portfolio of over $100 billion, as on September 30, 2010, Allstate recorded an estimated $15.1 billion of statutory capital surplus at the insurance companies and $3.5 billion of investments at the holding company, reflecting a well-capitalized position for future growth.
We anticipate continued benefits from Allstate’s diversification, superior financial strength rating, pricing discipline and proactive approach to investment, but the ongoing volatile markets along with interest rate and catastrophe risks will continue to impact the premiums and investment portfolio in the upcoming quarters.
On the other hand, buying back shares will help Allstate with fewer share count, thereby increasing earnings per share and return on equity and excess cash of the company. However, while this method helps in raising investors’ confidence, it only tends to virtually elevate the market value of the stock.
Meanwhile, on Tuesday, life insurer Prudential Financial Inc. (NYSE: PRU) also announced a dividend increment of as much as 64% along with a stock buyback plan.
On Tuesday, the shares of Allstate closed at $30.28, down 2.4%, on the New York Stock Exchange.
Q3 Revenues Up at Micromet
Micromet Inc.’s (Nasdaq: MITI) third quarter 2010 loss per share came in at 13 cents, narrower than the year-ago loss of 32 cents. After adjusting for the change in fair value of warrants, the company reported a loss per share of 12 cents, less than the year-ago post adjustment loss of 22 cents.
The Zacks Consensus Estimate hinted at a loss of 19 cents per share. The narrower loss in the reported quarter was attributable to an increase in revenues and a fall in operating expenses.
Revenues at Micromet climbed approximately 66% to $6.7 million. The rise was attributable to the increased revenues generated from collaboration agreements during the reported quarter. Revenues inched past the Zacks Consensus Estimate of $6 million for the third quarter of 2010.
Operating expenses during the reported quarter fell approximately 5.8% to $16.1 million. The fall was attributable to the reduction in research and development expenses (down 10.9%), which offset the 9% increase in general and administrative expenses.
Apart from announcing third quarter results, Micromet also provided an update on its pipeline. The company started a European pivotal study of its lead candidate blinatumomab (MT103) in adults with minimal residual disease (MRD) positive B-precursor acute lymphoblastic leukemia (ALL) in September 2010. The study is designed to evaluate the efficacy, safety and tolerability of the cancer candidate in up to 130 evaluable adults suffering from ALL with MRD after being treated with front-line chemotherapy.
In the same month, Micromet commenced a mid-stage study (n=20) of blinatumomab in adults suffering from relapsed or refractory B-precursor ALL. This study will evaluate the efficacy, safety and tolerability of blinatumomab in patients who do not respond to standard chemotherapy.
Moreover, in October, Micromet’s pipeline received a boost when the US Food and Drug Administration (FDA) accepted the investigational new drug (IND) application for its candidate MT111 (MEDI-565). The candidate is being co-developed with MedImmune, a wholly owned subsidiary of AstraZeneca (NYSE: AZN), to treat patients suffering from advanced gastrointestinal cancers. The study is expected to begin in the first half of 2011. Micromet also intends to advance its candidate, MT112, into formal preclinical development.
Currently, we have a neutral long-term stance on Micromet, which is supported by a Zacks #3 Rank (Short-term Hold recommendation) carried by the company.
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