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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Tuesday, July 08, 2008

Zacks Analyst Blog Highlights: Honda Motor Company, Zoll Medical Corporation, Macerich Company, Sonic Foundry Inc. and AutoZone, Inc.

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CHICAGO, Jul 08, 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: Honda Motor Company (NYSE: HMC), Zoll Medical Corporation (Nasdaq: ZOLL), Macerich Company (NYSE: MAC), Sonic Foundry Inc. (Nasdaq: SOFO) and AutoZone, Inc. (NYSE: AZO).

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:

Honda Motors Focuses on Hybrids

Honda Motor Company (NYSE: HMC) is expanding its business in Asia, growing its global network to increase efficiency and introducing new products to satisfy local markets. Further, capacity expansion plans in Asia and a new sales strategy in Japan inspire optimism about Honda's future prospects.

However, rising raw material prices and selling & administrative expenses are likely to pressure margins. Moreover, unfavorable currency exchange rates, flat-to-lower sales in its key markets (North America) and increased competition will threaten HMC's global competitive position. Therefore, we maintain our Hold rating with a six-month target price of $35.50. This is 13.1x our 2009 EPADR estimate.

Zoll Medical Feels Weak Economy

Sales of Zoll Medical Corporation's (Nasdaq: ZOLL) new products, E Series and AED Pro, continue to grow. Military sales that expanded to include other government sales are expected to support higher North American hospital sales from fiscal 2008. However, sales growth in the pre-hospital market and EMS can fall below expectations in North America, due to state budget deficits.

At its current price of $32.17 per share, ZOLL is trading at roughly 24x our fiscal 2009 earnings estimate of $1.33 per share, which is at a discount to the peer group multiple of roughly 26x. We believe the stock is appropriately valued at around 27x fiscal 2009 EPS estimate or a 1.1x FY09 P/E/G. Our price target moves to $36.

Rents Kept High for Macerich Co.

The Macerich Company (NYSE: MAC) reported strong 1Q08 results; FFO (funds from operations) came in at $96.0 million or $1.09 per share -- an increase of 13% over the comparable period in 2007. FFO growth was driven by higher revenues from the company's operating portfolio. Despite the current economic downturn in the U.S., the company's portfolio of high-end malls continues to perform at a high level.

Mall tenant sales continue to increase and the company is still re-leasing space at significantly higher rents. We expect rental rates to continue increasing as rents roll over in 2008 as the company's malls are concentrated in highly desirable locations around the country. In addition, MAC has a large development pipeline with good expected yields.

Sonic Foundry Market Challenges

Sonic Foundry Inc. (Nasdaq: SOFO) shares continue to be weak due to a challenging market for stocks and institutional investors exiting the stock. Better than expected cost savings and a focus on high margin services should help the company pass the break-even point earlier than we initially expected. Should the company be able to meet current expectations, we believe there is significant upside in the stock.

Although not out of the woods, if business tracks as planned the company could turn a small profit forecasted for 2009. Moreover, we were encouraged that SOFO came close to meeting guidance for its second quarter results.

AutoZone's Heavy Retail Exposure

Leading retailers of automotive parts and accessories AutoZone, Inc. (NYSE: AZO) has significant cash flow and plans to expand its square footage growth. AutoZone has maintained a mid-single-digit square footage growth rate by opening new stores every year. Category management efforts and supply chain initiatives are likely to be offset by higher staffing costs.

Moreover, AZO is suffering from sluggish same-store sales, which are expected to remain under pressure. Thus, we maintain our Hold recommendation on AutoZone, with a six-month target price of $132.00, which is 13.0x our 2008 EPS estimate.

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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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SOURCE: Zacks.com

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

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   Wire 2008 ********************************************************************** As of Friday, 07-04-2008 23:59, the latest
   Comtex SmarTrend� Alert, an automated pattern recognition system, indicated an UPTREND on 06-30-2008 for AZO @ $122.44. As
   of Friday, 07-04-2008 23:59, the latest Comtex SmarTrend Alert, an automated pattern recognition system, indicated an UPTREND
   on 03-24-2008 for HMC @ $29.72. As of Friday, 07-04-2008 23:59, the latest Comtex SmarTrend Alert, an automated pattern recognition
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