Zacks Analyst Blog Highlights: Motorola, Cisco Systems, Nokia, Reinsurance Group of America and MetLife.

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: Motorola (NYSE:MOT), Cisco Systems (Nasdaq:CSCO), Nokia (NYSE:NOK), Reinsurance Group of America (NYSE:RGA) and MetLife (NYSE:MET).

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

Here are highlights from Wednesday's Analyst Blog:

Changing Our Tune in June?

A week ago, the Federal Reserve Board minutes came out, and a few Fed officials gave speeches which seemed to bolster the case that May would mark the end of this tightening cycle. To my mind, the most persuasive evidence for the need to stop in May was the weakness in the housing market we saw in the February numbers. A housing crash could snowball into massive problems, and the housing bubble needs to be deflated slowly. New data shows that the housing market is far from collapse (so far, I still think it is way out of line with economic reality, at least in many areas of the country, but markets can stay irrational much longer than you can stay solvent; rationally, the dot-com stocks were shorts by the middle of 1998).

There is ample evidence of potential inflation problems in the economy. Commodities are going through the roof, including the most important commodity of them all, oil. Copper, the metal with a Doctorate in Economics, has been pounding the table saying that world economic growth is very strong. Gold, while not the indicator of inflation that it once was, is trading at levels not seen since the Carter Administration. The numbers that have come out this week, very high consumer confidence, much-higher-than-expected durable goods orders, and a shockingly strong rebound in new home sales, all indicate to me that the case for "one and done" in May is far from being a slam dunk. Chairman Bernanke has said that the Fed will be "data dependent" with regard to further changes in the Fed Funds rate. The data this week strongly indicates that an increase in June will be needed. It's not a sure thing, and there are more numbers coming out later this week, but I think the odds of a June increase are now significantly greater than 50/50.

Notes on Motorola

CEO Ed Zangers has made tremendous progress turning around the stagnation of Motorola (NYSE:MOT) since the telecom downturn. The company has sold off non-core business groups including Freescale Semiconductor (FSL) and its automotive electronics unit to foster a focus on telecom infrastructure solutions for wireless and broadband. An emerging jewel that does not get as much attention (compared to MOT's handset business) is its cable set-top box initiatives that pose a direct challenge against Cisco (Nasdaq:CSCO) and its recent Scientific Atlanta acquisition.

Concerns at Motorola continue to be associated with the margin sensitivity of the handset business as low-cost cellular devices continue to gain traction in the market, in particular for the emerging markets. Nokia (NYSE:NOK) has also been a dominant force in maintaining leadership market positions in these markets, including India, Europe and China, while Motorola has protected its North American and Latin America market share. We maintain our $28 price target based on 18x cash adjusted 2006 earnings while we assess the handset margin issue, and see recurring progress with set-top box technology and sales.

RGA is Benefiting

Reinsurance Group of America (NYSE:RGA) is benefiting from shrinking capacity in the U.S. life reinsurance market - after several large companies recently left the market - and from rapidly growing overseas operations. Moreover, mortality experience in the company's mainstay U.S. operations has improved and been favorable to in-line in the last three quarters, after being unfavorable in the prior five. This recent string of unfavorable mortality has created investor skepticism over RGA's pricing and, we believe, is depressing the stock's valuation well below its peers' multiples. In our view, improvement will provide a near-term catalyst to upside in the stock.

The trend of unfavorable mortality experience in the company's US operations appears to have corrected itself. After five consecutive quarters of unfavorable mortality, RGA's US operations have had three favorable or in-line quarters. We believe investors have assigned lower valuation multiple to incorporate added uncertainty and possible premium under-pricing in the company mainstay operations. Thus, we think improving mortality will provide a primary catalyst for multiple expansion, in our opinion.

RGA's international operations are growing rapidly (net premiums grew 24% in the first quarter). We expect this strong growth to continue, albeit off of a small base (the region accounted for just 14% of RGA's premiums in 2004) as the company continues adding offices overseas.

RGA is trading at a discount to its peers on a price-to-book basis (currently at 1.18x book compared with 1.39x for the peer group), owing to the adverse mortality in its U.S. operations and an overhang in the stock created by MetLife's (NYSE:MET) 53% ownership stake. In our view, the company's growth prospects are slightly more positive than many of its peers and we think another quarter of favorable US mortality (after the last three quarters of favorable to in-line experience) will quell investors' concern over RGA's pricing and provide an upside catalyst to the stock. Our six to nine-month price target of $53 incorporates a multiple of 1.24x estimated adjusted book value of $42.64 at September 30, 2006. This is still below the peer-group median price-to-book multiple of 1.39, incorporating a discount for MetLife's share overhang.

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

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