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June 25, 2009
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Chicago, IL - June 25, 2009 - 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: Boeing (BA), Paccar (PCAR), International Business Machines (IBM), Hewlett Packard (HPQ) and Ultimate Software (ULTI).
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Here are highlights from Wednesday's Analyst Blog:
Durable Goods Orders Rebounding
The new order data can be greatly influenced by big orders for aircraft. After all, it just takes a few orders for a new Boeing (BA) 777 to make up for declines in many other areas. This is indeed what happened this month, with orders for civilian aircraft jumping 68.1% -- but that is coming off an extraordinarily low level. On a year-to-date basis, even with the jump in May, civilian aircraft orders are down 73.1% on a year-to-date basis.
The other part of civilian transportation goods, motor vehicles and parts, saw an 8.1% decline in new orders and is down 31.4% on a year-to-date basis. This is not good news for companies like Paccar (PCAR).
The other good news in the report was an increase in non-defense capital goods orders excluding aircraft. This is a good proxy for business capital spending, which is an important (and volatile) part of GDP. Also known as core capital goods orders, it rose by 4.8% for the month, but is down 24.0% on a year-to-date basis.
One area that showed very significant strength for the month was in orders for Computers and related products, which saw a 9.4% increase, reversing declines of 6.6% in April and 4.6% in March. On a year-to-date basis computer orders are down 21.0%. Still, count this rebound as good news for companies like International Business Machines (IBM) and Hewlett Packard (HPQ).
Ultimate SW Deserves Its Premium
Shares of Ultimate Software (ULTI) have been trading higher since its relative recent low of $12.95 on February 27. At current prices, ULTI is trading at a forward P/E of 12.9 times FY2010 EPS estimate and roughly 2.5 times FY2010 EV/Sales. On both measures, the stock is trading at a slightly higher valuation compared to its peer group. However, given its dominant position in the on-demand payroll software market, we consider the shares fairly valued.
During Q1, the company decided to withdraw its guidance of Annual Recurring Revenue (ARR), an important valuation metric for ULTI, which may be interpreted as an attempt by the company to divert attention away from any fundamental weakness. However, that may not be the case, and we may have to wait until Q2 results to evaluate the situation.
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