Zacks Analyst Blog Highlights: XenoPort, GlaxoSmithKline, Pfizer, Sempra Energy and Royal Bank of Scotland

CHICAGO--(BUSINESS WIRE)--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: XenoPort Inc. (Nasdaq: XNPT), GlaxoSmithKline (NYSE: GSK), Pfizer (NYSE: PFE), Sempra Energy (NYSE: SRE) and Royal Bank of Scotland (NYSE: RBS).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=4579

Here are highlights from Monday’s Analyst Blog:

XenoPort Drug May Have “Legs”

We consider XenoPort Inc.’s (Nasdaq: XNPT) restless leg syndrome (RLS) drug candidate, XP-13512 (to be called Solzira in the U.S.), to be a potential blockbuster opportunity. The data has been highly encouraging and XP-13512 could launch in late 2009. XenoPort is partnered with GlaxoSmithKline (NYSE: GSK) for development and commercialization in the U.S. and select countries outside the U.S.

As for now we are holding off on modeling sales in neuropathic pain and migraine until we see more data. However, we believe that if XenoPort can see Solzira to commercialization, it will improve the future partnering plans for other compounds such as XP-19986 for gastroesophageal reflux disease, and allow management to move forward with other candidates such as the intravenous anesthetic XP-20925.

XenoPort stock is down 25 percent year-to-date and some 35 percent on several concerns. We think the market is coming to grips with the power XenoPort’s Transported Prodrug technology.

Pfizer’s (NYSE: PFE) Lyrica could represent significant competition to Solzira in the RLS market. The overall market conditions have been poor, specifically with respect to volatile names in the biotechnology market, and even more so with stocks that had outstanding past performance as investors are looking to book profits on their winners.

Buy Sempra Energy on Value

Impressive results in the first quarter, led by strong performance in its utilities pipelines and storage business, conclusion of general rate cases, operational REX-West, launch of its commodities joint-venture, and completion of its Baja California liquefied natural gas (LNG) terminal, collectively support the bullish outlook for Sempra Energy (NYSE: SRE).

Looking ahead, with the initiation of a $1 billion share repurchase program, new solar power contracts and a recently increased $1.40 annual dividend, we see consistent growth in earnings power. However, we note that the company may face difficulties from a higher level of capital expenditures. Nevertheless, in a valuation call given a discount in forward earnings valuation, we maintain our Buy recommendation on SRE with a six-month target price of $60.75, or 16.4x our 2008 EPS estimate and 13.3x our forward 2009 estimate.

SRE appears to be relatively well-positioned to benefit from core electric and natural gas operations, wholesale energy commodities marketing and trading, development of LNG resources, and earnings accretive acquisitions. Financially, the company’s 9% dividend increase to an annual rate of $1.40 per share in May 2008. This may attract conservative income-seeking investors.

The SRE common stock trades at only 15.0x and 12.1x, respectively, our 2008 and 2009 earnings per share estimates, or at a moderate discount to the natural gas distribution industry. We attribute the stock’s current earnings-based discount valuation to the uncertainty surrounding the lack of visibility into regulatory proceedings, declining business from the company s natural gas operations, as well as a below-industry average dividend yield.

We see earnings growth through 2009 driven by impressive profitability at one of its components, San Diego Gas & Electric, Federal Energy Regulatory Commission’s approval of the Rockies pipeline project, the joint venture with the Royal Bank of Scotland (NYSE: RBS) and additional asset sales.

Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=2649.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=2677

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=4580.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.