Zacks Analyst Blog Highlights: AmBev, Quilmes Industrial, Anheuser Busch, J.C. Penney and Emergency Medical Services.

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), Quilmes Industrial (NYSE: LQU), Anheuser Busch (NYSE: BUD), J.C. Penney (NYSE: JCP) and Emergency Medical Services (NYSE: EMS).

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Here are highlights from Friday's Analyst Blog:

Risks & Reward Balance AmBev

We are keeping our current Hold recommendation on Companhia de Bebidas das Americas, or AmBev (NYSE: ABV). Despite lower-than-expected results in the first quarter, the company delivered top-line growth above volume growth.

Quilmes Industrial, or Quinsa's (NYSE: LQU) results were also positive, and the North American results continued to show some improvements. However, the less benign monetary policy in Brazil, growing inflation in Argentina, the strength of the Brazilian real and its effect on the company's international sales, weak results in Central America, higher commodity costs, and the difficult economic environment in the U.S. are matters of high concern.

Presently, AmBev is trading at 26.2x our 2008 EPS estimates, higher than the industry mean of 17.3x. Excluding the company's goodwill amortization, its 2008 P/E would be close to 16.5x, close to the industry median. AmBev has good growth prospects, above average profitability, history of good results, dominant position in Latin America, and increasing geographical diversification.

In our opinion, ABV's valuation should increase to 18x EPS estimate without the goodwill amortization, with a small premium above some international players like Anheuser Busch (NYSE: BUD) and Brown Forman, which have lower growth outlooks and are more exposed to the problems of the U.S. market. Our target price is $84.25.

JCP Results Illustrate Headwinds

J.C. Penney's (NYSE: JCP) first quarter sales fell 5.1% year-over-year. Its earnings per share fell 48%, but were $0.04 ahead of the company's most recent guidance. We note that management's previous guidance was $0.75-$0.80. With that in mind, management established second quarter EPS guidance at $0.38, compared to our prior estimate of $0.43.

JCP shares were up 4.5% on this news. We are not as optimistic, and are lowering our estimates for 2008 and 2009, due to growing inventory levels vs. sales declines, declining profit margins, and a difficult retail environment that is not showing signs of improvement. We maintain our Hold rating on the stock.

Debt Risk at Emergency Medical

Emergency Medical Services Corporation (NYSE: EMS) is a leading provider of emergency medical services in the United States, operating under the AMR and EmCare brands. The company reported better-than-expected 1Q08 net income of $17 million (up 2.2% year over year), or EPS of $0.40, versus net income of $16.6 million, or EPS of $0.39 in the first quarter of last year.

Despite an encouraging performance this quarter, which was buoyed by a strong flu season, we remain concerned with the company's high level of long-term debt and exposure to rising fuel costs given the 80 basis point year-over-year decrease in EBITDA margins in 1Q08. We maintain our Hold rating at current levels.

We have valued EMS on a forward price/earnings (P/E) basis, as well as a comparison to similar firms in the healthcare sector. We believe EMS is well positioned strategically to grow its primary AMR subsidiary and at the same time continue expanding its EmCare network.

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