Just as your pulse is checked during a routine physical, free cash flow is used as an indicator of a company's health. It equals the cash brought in from operations minus the money needed to pay the bills. Think about leftover money in your checking account after you pay this month's bills.

Investors and analysts see this leftover money as a gauge of a company's ability to perform. It is available for transactions such as handing out dividends and working on new products.

Some argue free cash flow is wrongly overshadowed by the emphasis often placed on earnings. Earnings numbers can be manipulated and don't always tell the whole story -- and earnings don't mean much if there's nothing left over after a company pays its expenses. Even if you bring in a six-figure salary, but no money left after paying the bills, are you in great financial shape?

You don't have to be Einstein to figure out free cash flow. To calculate the number, subtract the company's expenditures and dividends from its operating cash flow.

If the free cash flow is written in red ink, it doesn't necessarily signal curtains. This is common for young companies looking to grow. It also could be a result of heavy investments, which in the long run could be worth a standing ovation.

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Friday, July 18, 2008

Zacks Analyst Blog Highlights: Dow Chemical Co., Rohm and Haas Co., Aflac Inc., Royal Caribbean Cruises Ltd. and Lawson Software, Inc.

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CHICAGO, Jul 18, 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: Dow Chemical Co. (NYSE: DOW), Rohm and Haas Co. (NYSE: ROH), Aflac Inc. (NYSE: AFL), Royal Caribbean Cruises Ltd. (NYSE: RCL) and Lawson Software, Inc. (Nasdaq: LWSN).

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Here are highlights from Thursday's Analyst Blog:

DOW Merger Needs Some Time

In order to expand its specialty business, Dow Chemical (NYSE: DOW) would takeover Rohm and Haas Co. (NYSE: ROH). This will consolidate the chemical producer's higher-margin and higher-growth specialty businesses and reduce the volatility in earnings and cash flow.

However, high raw material costs have forced the company to temporarily idle or reduce production at several of its plants. Further, DOW has a high exposure to the commodity chemical cycle. We expect earnings to remain under pressure and rate the stock a Hold with a target of $35.00.

Aflac Target Price Lowered

Aflac Incorporated (NYSE: AFL) is expected to release its second quarter earnings on July 23, 2008, with a conference call scheduled for the next morning. First quarter operating earnings of $475 million, or $0.98 per share, were slightly ahead of estimates, based on better-than-expected sales growth in its Japan operations.

As we remain confident about the fundamental outlook for AFL, especially in Japan, we expect some expansion in the multiple in the near term. We will get further color on the outlook for the company, when a clearer picture about the performance of the new product and sales though new channels in Japan emerges. Ahead of the results, we are maintaining our FY08 and FY09 estimates and our Hold rating on the shares of AFL.

Royal Caribbean a Good Buy

We expect Royal Caribbean (NYSE: RCL) to continue to benefit from favorable supply and steady pricing trends, which should lead to solid growth in revenue yields. The higher revenue yields should also lead to strong growth in net income as the company brings on additional capacity.

While we expect higher fuel prices to remain challenging going forward, we believe that core operating growth will remain attractive. Solid occupancy trends and higher spending per passenger should allow Royal Caribbean to further leverage fixed costs and offset some of the inflationary pressures from higher fuel, employee-related, and food costs.

Lawson Software Guidance Dips

We maintain our Hold rating on the shares of Lawson Software, Inc. (Nasdaq: LWSN). The company reported revenue of $233 million and EPS of $0.10 vs. consensus of $229 million and $0.10 with slight upside on license, maintenance and consulting revenues. Q4 marked record software contract signings and operating margins hitting an all-time high with further improvements expected.

Deferred license revenue grew approximately 50% y/y. This indicates that last year's sales ramp and new sales management are executing well. LWSN plans to add another 10% in QBSR in FY09. Furthermore, the high contracting levels and deferred sales will largely be recognized over the next several quarters, giving LWSN increased visibility.

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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

Zacks.com Mark Vickery Web Content Editor 312-265-9380 Visit: www.zacks.com

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   Business Wire 2008 ********************************************************************** As of Monday, 07-14-2008 23:59,
   the latest Comtex SmarTrend� Alert, an automated pattern recognition system, indicated a DOWNTREND on 06-27-2008 for AFL @
   $63.32. As of Monday, 07-14-2008 23:59, the latest Comtex SmarTrend Alert, an automated pattern recognition system, indicated
   a DOWNTREND on 05-27-2008 for DOW @ $40.25. As of Monday, 07-14-2008 23:59, the latest Comtex SmarTrend Alert, an automated
   pattern recognition system, indicated a DOWNTREND on 04-15-2008 for RCL @ $31.77. For more information on SmarTrend, contact
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