Zacks Analyst Blog Highlights: Genta and Zion.

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: Genta, Incorporated (Nasdaq: GNTA) and Zion Bancorporation (Nasdaq: ZION).

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

Here are highlights from Thursday's Analyst Blog:

Dubious Labor Numbers?

"Hourly compensation in the business sector grew at a 6.3 percent annual rate in the second quarter of 2006, compared with a 13.6 percent rate of growth one quarter earlier (as revised). Hourly compensation includes wages and salaries, supplements, employer contributions to employee benefit plans, and taxes. Real hourly compensation, which takes into account changes in consumer prices, rose 1.3 percent in the second quarter of 2006 after increasing 11.3 percent in the first quarter of the year."

"Unit labor costs, which reflect changes in hourly compensation and productivity, rose 4.8 percent in the second quarter of 2006. Unit labor costs had increased 8.7 percent in the first quarter of 2006, when hourly compensation grew much faster than output per hour. The implicit price deflator for business output, which exhibits changes in unit labor costs and unit nonlabor payments, rose 3.1 percent in the second quarter and 2.7% in the first quarter of 2006."

- Bureau of Labor Statistics (BLS): Productivity and Costs Second Quarter Revised

These numbers, if we can believe them, are bad news for corporate profits but very good news for the U.S. consumer and the overall health of the economy. However, they don't seem to match up with the rest of the numbers, such as average hourly earnings.

Honestly, I knew the first quarter was going pretty strong, partially as a rebound from a weak fourth quarter (the storms hurt the fourth quarter and the clean-up and rebuilding helped the first). But really folks, hourly compensation going up at 13.6% in the first quarter, cooling down to 6.3% in the second? These are revised numbers; originally, hourly compensation was reported at 6.9% for the first quarter (before inflation), which was already a very strong number.

If these hourly compensation numbers are true, never mind about the breakdown in the housing market, the end of the housing ATM, the resetting option rate ARM's and everything else -- the American worker is rich, rich I tell ya! Of course, the downside to that is the unit labor cost numbers, which are highly inflationary. If unit labor costs really went up 8.7% in the first quarter, there is no way we would see the sort of increases in corporate profits we have been seeing, not with inflation below 5%. I would love to believe these numbers, but they look extremely fishy to me.

Sell Your Genta Shares

Genta, Incorporated (Nasdaq: GNTA) is a biopharmaceutical company focused on developing and commercializing drugs for the treatment of cancer. The company's leading candidate, Genasense, recently got a negative recommendation from FDA oncology advisory committee.

The results of Genasense for the treatment of advanced melanoma were mixed. The prospect of Genasense has been in serious questions. We therefore downgrade the shares from Hold to Sell with a target price of $0.35.

Bringing Down ZION Target

We are reiterating our Hold rating, while decreasing our price target on Zion Bancorporation (Nasdaq: ZION) on lower peer multiples overall. Q2 was the 2nd full quarter to include Amegy results. Compensation costs were lower than anticipated, but the impact was $8.9 M in merger charges, vs. the $3.5 Mn management had projected. Net revenue was weaker than projected, though, with all of the miss on the spread side. Loan growth was very solid, but deposit growth lagged, leading to a negative mix shift on the funding side and pressure on the margin.

The shares now look somewhat attractive on a PEG basis and fair using ROE-adjusted price-to-book. We continue to believe that a peer multiple is warranted. We view the $1.44 annual dividend as secure.

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

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