Zacks Analyst Blog Highlights: Vornado Realty Trust, Equity Office, Schering-Plough, Merck and West Coast Bancorp.

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: Vornado Realty Trust (NYSE: VNO), Equity Office (NYSE: EOP), Schering-Plough (NYSE: SGP), Merck (NYSE: MRK) and West Coast Bancorp (Nasdaq: WCBO).

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

Here are highlights from Tuesday's Analyst Blog:

Wait & See with Vornado

Vornado Realty Trust (NYSE: VNO) recently made a bid for Equity Office (NYSE: EOP) at $52.00 per share, although The Blackstone Group has responded with a higher offer. We will wait to see if VNO ups its offer, although it seems that Equity will go with the Blackstone bid.

Operationally, Vornado continues to increase rents in its office portfolio, as it has a high concentration in Manhattan, the top office market in the country. Vornado should continue to produce growing cash flow into 2007, with occupancies well-above 94% at top-tier assets in first-rate office and retail markets. Tempering our enthusiasm for the company is a historically high valuation, softness in the company's core Washington D.C. market, low yield, and a decreasing dividend coverage ratio.

Vornado has one of the largest, most concentrated portfolios of properties in the REIT [real estate investment trust] universe, making it a favorable play on the fortunes of the New York City and Washington D.C. area markets. These are two strong long-term regions where downtown and suburban office vacancies are under 10%, well below the national average which is about 15% in major markets across the U.S. These two markets continue be among the nations leader in job growth, the biggest precursor of office demand.

SGP Target at $28

Schering-Plough (NYSE: SGP) is engaged in the development, manufacturing and marketing of pharmaceutical products around the world. The company focuses on prescription drugs, animal health, foot-care and sun-care products. Lead products include its antihistamine franchise Claritin/Clarinex and a cholesterol-lowering joint-venture therapy treatment (Vytorin) with Merck (NYSE: MRK).

The turnaround is complete at SGP. The company should deliver the highest four-year earnings growth rate in the large-cap pharmaceutical industry. Valuation becomes attractive based on recovery EPS in 2008 and 2009. We recommend investors Buy the name up to $28.

Our Buy rating is based on the strong earnings growth and attractive valuation based on recovery 2009 EPS of $1.41. Based on this 2009 EPS, the stock is currently trading at 17.6x earnings. This is a premium to the 13.9x 2009 EPS at which the rest of the large-cap pharmaceutical group trades. However, Schering-Plough will see EPS growth in 2009 of nearly 13%, over twice that of the peer-group.

Solid Quarter for West Coast Bancorp

We are reiterating our Hold rating and $34 price target on West Coast Bancorp (Nasdaq: WCBO) after WCBO's fourth quarter [Q4] earnings release last week. We see it as a solid quarter on all fronts. GAAP [generally accepted accounting principles] EPS [earnings per share] of $0.48 was a penny short of our estimate and consensus, but would have met both if not for a couple of small nonrecurring items.

On a GAAP basis, both revenues and expenses lined up quite nicely with our model, and pre-tax income was virtually identical. A higher tax rate created the negative variance, coming in 180 basis points [bps] higher than modeled. Loan growth was solid, and deposit growth was among the best we have seen in Q4. Our '07 estimates are practically unchanged (Q1 rounds up by a penny), and we are establishing our '08 estimate at $2.36.

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

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