Zacks Analyst Blog Highlights: AmBev, Forest Laboratories, Mylan and Replidyne.

CHICAGO -- 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: AmBev (NYSE: ABV), Forest Laboratories, Inc. (NYSE: FRX), Mylan (NYSE: MYL) and Replidyne (Nasdaq: RDYN).

See the latest posts to the Analyst Blog by visiting: http://at.zacks.com/?id=2673

Here are highlights from Wednesday's Analyst Blog:

AmBev Downgraded to a Hold

We are changing our current recommendation on Companhia de Bebidas das Americas, or AmBev (NYSE: ABV) from Buy to Hold. Second quarter 2007 results were solid, and the key Brazilian beer segment posted encouraging results. North American results showed improvements, and Quinsa's results were solid. However, the possibility that the Brazilian Central Bank will stop cutting rates in the very short term, in addition to increasing inflation in Argentina and weak results in Central America, is concerning.

Additionally, after the recent rally, we think that the stock's current valuation is no longer particularly attractive. Presently, AmBev is trading at 31.8x our 2007 EPS estimates, higher than the industry mean of 20.7x. We believe the company deserves an above-average valuation, due to its higher growth prospects, above average profitability, history of good results, dominant position in Latin America (particularly in the key Brazilian beer business), and increasing geographical diversification.

However, it is impossible not to note that short-term business environment is not as positive now as it was some months ago. In our opinion, ABV's valuation should increase to 25x EPS estimate without the goodwill amortization, a 20% premium over the industry mean, which produces our six-month target price of $82.00.

Cautious Outlook on Forest Labs

Forest Laboratories, Inc. (NYSE: FRX) focuses on the therapeutic areas of the central nervous system (CNS), cardiovascular and respiratory systems, as well as research and development programs that address a range of health conditions. Principal brands include Lexapro for depression, Namenda for Alzheimer's disease and Benicar for high blood pressure. We believe Forest needs to work on developing products that could help make up for the loss of revenues that is going to take place once Lexapro and Namenda lose patent protection in the 2012-2013 timeframe.

Forest Laboratories shares currently sell at 11.8x our fiscal 2008 EPS estimate of $3.25. Fiscal 2006 was a transition period for the company with earnings declining primarily due to the lost sales of Celexa and the $125 million upfront R&D payments to Mylan (NYSE: MYL) and Replidyne (Nasdaq: RDYN). As such, we were pleased to see that the company achieved strong top- and bottom-line growth in fiscal 2007.

While we are enthusiastic about the potential for further growth in the Lexapro and Namenda products, we remain concerned about the company's R&D failures. We believe that the shares have been under pressure over the past several months mainly due to the pipeline failures. We recommend waiting on the sidelines until visibility on the pipeline candidates improves. As such, we maintain our Hold rating and our $41 target is based on our 12.5x fiscal 2008 estimate of $3.25.

See the latest posts to the Analyst Blog by visiting http://at.zacks.com/?id=2645

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