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Inside Wall Street


Heinz Is Looking Richer

Major food processor H.J. Heinz (HNZ) is ranked highly for safety and price stability by research outfit Value Line, even though Wall Street isn't too impressed with it. But that may change, with some pros suggesting that Heinz is apt to attract suitors precisely for its fundamentals, undervalued assets and underpriced stock.

Featured in this space in April when it was trading at 33 a share, Heinz has since climbed to 39.69 even though only 7 of 19 analysts rate it a buy, 11 are neutral, and one tags it a sell. But Heinz "will likely be on top of the list of food companies that will be a takeover target," says Mark Boyar, president of Boyar Asset Management, which owns shares. Known for its familiar Heinz Ketchup, it also makes other brand products such as Ore-Ida potatoes, Classico pasta sauce, and Plasmon baby food. On assets alone, says Boyar, Heinz is worth 50 a share, but it could fetch a premium price of 65 in a takeover for its cash-generating qualities and hefty 4.2% dividend yield.

Standard & Poor's (MHP) Tom Graves says what's alluring about Heinz is its growth in emerging markets where sales are rising faster. Some 55% of sales come from outside the U.S. Rating Heinz a buy, Graves upped his 2009 forecast to $2.78 a share from $2.74 and 2010 to $3 from $2.93.

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

Carnival Cruises Along

Despite the soft economy and weak consumer spending, the world's largest cruise line, Carnival (CCL), beat the Street's third-quarter forecasts. Stronger-than-expected ticket pricing in the summer helped results, notes Robert LaFleur of Susquehanna Financial Group, who rates the stock a buy. It has sailed to 33.28 a share from 20 in March. Bookings for the remainder of the year and for the first half of 2010 are running 19% ahead of the prior year, says LaFleur. So he bumped up his 2009 earnings forecast to $2.17 a share from an earlier $2.09, and his 2010 estimate to $2.65 from $2.29.

Joseph Hovorka of investment firm Raymond James upgraded his rating on Carnival to a strong buy from market perform, with a 12-month target of 42. One reason: Bookings are picking up, the analyst says, while pricing may have reached bottom.

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

Access Pharma: In the Pink

As major pharmaceuticals seek companies with a pipeline of promising drugs to augment their own depleting inventories, some pros bet that one target will be Access Pharmaceuticals (ACCP), now at 2.85 a share. It hit a high of 17 in 2005. Its drug MuGard, approved by the FDA in 2007, treats oral mucositis, a debilitating side effect of chemotherapy and radiation treatment. It's now sold in Europe, with a global market potential of $5 billion, says Access. The company regained North American rights this summer and hopes to partner with a big drugmaker. Keith Markey of Griffin Securities (it did business with Access) says MuGard alone is worth more than Access' stock, and its two cancer drugs, Prolindac and Thiarabine, are big extras that "make Access a cheap takeover bait." Robert Wasserman of Dawson James Securities says Access is an enticing target worth 11.

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.


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