Just like you never want to hear a doctor say "oops" in the operating room, you never want to see a going-concern statement in a financial report about a company you own. Accountants throw these in when they've been over the books, talked to customers, and checked the horoscopes and have concluded there is "substantial doubt" about a company's ability to remain in business. In short, don't blame the accountants if the company files for bankruptcy protection.

You¿d reckon that a going-concern statement would be enough to send investors running to the exits, but it's not. True, many large institutions automatically bail when an existing company gets slapped with one of these, but many individuals (often wrongly) take a chance they know more than the bean counters.

During the tech boom of the late 1990s, many companies actually went public even though they had been hit with going-concern statements. Many of those companies subsequently disappeared. Enough said.

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Thursday, July 03, 2008

Zacks Analyst Blog Highlights: Axis Capital, BJ Services, Intuitive Surgical, ITT Educational Services and Waddell & Reed.

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CHICAGO, Jul 03, 2008 (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: Axis Capital Holdings Ltd. (NYSE: AXS), BJ Services Company (NYSE: BJS), Intuitive Surgical Inc. (Nasdaq: ISRG), ITT Educational Services Inc. (NYSE: ESI) and Waddell & Reed (NYSE: WDR).

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Here are highlights from Wednesday's Analyst Blog:

Axis Capital Under Some Pressure

Axis Capital Holdings Ltd.'s (NYSE: AXS) first-quarter operating earnings were below our expectations from a lower level of premiums written than anticipated, specifically in the reinsurance segment, and a higher level of large individual risk losses worldwide. We continue to view the shares of the company as a Hold.

Although we think the company has been able to benefit from the hurricane-related price hardening markets of a few years ago, going forward, we would expect additional benefits to be somewhat more limited. Our six-month price target of $30.25 per share, down from $37.40 per share, incorporates a price-to-book multiple of 0.90x to our fine-tuned diluted book value estimate of $33.60 per share for December 31, 2008.

Positives for BJ Accounted For

BJ Services Company (NYSE: BJS) remains well-positioned to continue benefiting from the still favorable macro environment. The company's worldwide operations are primarily driven by the number of oil and natural gas wells being drilled, the depth and drilling conditions of such wells, the number of well completions and the level of workover activity.

However, the pressure pumping market continues to remain in an over-supplied state, resulting in pricing pressures and margin erosion. While the demand side of the equation is expected to continue improving, it may take a while for the supply overhang to work itself through. So, while valuation has become reasonable, these headwinds continue to keep us on the sidelines.

Intuitive Surgical on the S&P

Standard & Poor's announced that it replaced Bear Stearns with Intuitive Surgical, Inc. (Nasdaq: ISRG) after the close of trading on May 30. Without direct competition, Intuitive's main challenges to growth are overcoming the capital investment challenges and gaining physician adoption for each procedure specialty.

Earnings growth may find some pressure from higher expected operating expenses to support growth. Selling, general and administrative expenses are expected to increase in the future to support the company's expanding business. We believe the stock is fairly valued at roughly 59x our 2008 EPS estimate, or at roughly a 1.5x P/E/G on 2008 EPS. Our price target moves to $291.

High Bar Set for ITT Educational

ITT Educational Services, Inc. (NYSE: ESI) is demonstrating steady revenue growth, primarily through opening new campuses, expanding existing campuses, offering new degree programs, and new student enrollment growth. Though the company reported an outstanding first quarter, higher advertising expenses and the costs incurred from opening new campuses are concerning. The Hold rating is maintained.

ITT Educational Services is currently selling at 20 times trailing 12-month EPS, reflecting the company's revenue and earnings growth profile. Revenues have grown at a 13% five-year compound annual growth rate. Over the last few years, the stock has traded in a wide P/E range of 16 to 40. The target price is $90.75, which is an 18 P/E multiple on trailing twelve month earnings.

Equities Cap Waddell & Reed Gains

Waddell & Reed's (NYSE: WDR) assets under management are highly concentrated in equities. As the financial markets in general and the equity markets in particular are expected to remain volatile in the near future, we suspect that such a market situation may put a cap on the upward potential of the share price in the near-to medium-term.

Based on WDR's 1Q08 results and considering its fundamental strengths, we are slightly adjusting our FY08 and FY09 earnings estimates to $1.74 per share and $2.28 per share, respectively. WDR is currently trading at 20.1 times the consensus estimate for FY08, a 45% premium to 13.9 times for the peer group median.

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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.

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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.

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SOURCE: Zacks.com

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Copyright Business Wire 2008 **********************************************************************
   As of Sunday, 06-29-2008 23:59, the latest Comtex SmarTrend� Alert, an automated pattern recognition system, indicated a DOWNTREND
   on 03-03-2008 for AXS @ $36.36. As of Sunday, 06-29-2008 23:59, the latest Comtex SmarTrend Alert, an automated pattern recognition
   system, indicated an UPTREND on 05-16-2008 for BJS @ $31.15. As of Sunday, 06-29-2008 23:59, the latest Comtex SmarTrend Alert,
   an automated pattern recognition system, indicated an UPTREND on 04-24-2008 for ESI @ $100.69. For more information on SmarTrend,
   contact your market data provider or go to www.mysmartrend.com SmarTrend is a registered trademark of Comtex News Network,
   Inc. Copyright � 2004-2008 Comtex News Network, Inc. All rights reserved.