Here are highlights from Wednesday's Analyst Blog:

Risks for Philip Morris Continue

Philip Morris International, Inc. (NYSE: PM) has a history of strong operating and financial performance. The management has a credible strategy of growing EPS in the range of 10% to 12% and returning a substantial portion of the company's cash flow to shareholders.

The stock of Philip Morris International has only been trading since the end of March. Having followed the tobacco industry for two decades, PMI's stock should trade at a slight premium to Altria Group Inc. (NYSE: MO), which has traded in a P/E multiple range of 6 to 18 over the last 10 years.

The stocks of tobacco companies have maintained a low P/E due to tobacco-related litigation issues and have been pressured down to a single-digit P/E during times of court case losses and of excise tax increases. We expect PMI's stock to trade in a P/E multiple range of 10 to 17. The target price of $54 is 16.5 times our year-end 2008 earnings estimate of $3.27.

Houston Wire & Cable Discounted

Houston Wire & Cable Company (Nasdaq: HWCC) reported first quarter EPS of $0.37, above our estimate of $0.33 and the year-ago level of $0.35, due to the impact of share repurchases. Sales continue to grow from HWCC's continuous penetration in its target markets in the Utility, Infrastructure and Industrial Sectors.

Given its investment in expanding the sales force, the private label business and the penetration of three key end markets off a smaller sales base than its peers, we believe HWCC can grow faster than the industry. In the near term, though, we expect the 2008 sales growth rate to decelerate compared to 2007 and the company's long-term growth rate in light of a weaker U.S. economy. Our price target is $21.00, based on about 12.4x our 2008 EPS estimate.

NL Industries with Some Concerns

Stronger volumes for TiO2 with a superior technology process, along with new products and pricing power in the component products business drive our positive outlook on NL Industries Inc. (NYSE: NL). However, contracting margins in both the TiO2 and components business present a major concern. As a result, we take a neutral view on the stock, and set a six-month target price of $11.00. This is 10.1x our 2008 estimate.

The TiO2 industry is highly competitive. Raw material and energy costs are expected to stay elevated in the near future. Margins are under pressure in the Components business as well. This segment is facing a tough raw material pricing environment, with commodity prices for steel and zinc on the rise.

Cancun Airport Merge Affects ASR

We are reiterating our Hold recommendation on Grupo Aeroportuario del Sureste, S.A. de C.V. (NYSE: ASR). First quarter operating results were better than expected and the outlook for the very short term remained encouraging since passenger traffic continued to increase.

Nevertheless, the continued increase in oil prices, higher inflation and interest rates throughout the world and the difficult economic environment in the U.S. are important sources of concern. Finally, the stock's valuation is not particularly attractive.

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As it did with respect to the 2003 and 2004 NPM Adjustments, PM USA elected to pay the disputed money to the states, although it had the right under the Master Settlement Agreement to put the disputed money into the Disputed Payments Account.

"We continue to work in good faith with the states to resolve the Non-Participating Manufacturer adjustment dispute, whether by settlement or by the arbitration process specified by the Master Settlement Agreement," said Denise Keane, executive vice president and general counsel, Altria Group, Inc., speaking on behalf of PM USA.

PM USA and the other Original Participating Manufacturers believe that the dispute over the NPM Adjustment, including the States' claims to have diligently enforced their qualifying escrow statutes, is subject to binding arbitration pursuant to the Master Settlement Agreement's arbitration clause.

States and territories have asserted that this dispute, including their diligent enforcement claims, should be determined by state courts. To date, more than 45 courts have agreed with PM USA's position that arbitration is the required forum for this dispute.

The NPM Adjustment Proceedings Background

The Master Settlement Agreement is a contract between Participating Manufacturers and the Settling States that establishes certain rights and obligations for each of the parties.

The amount each Original Participating Manufacturer pays each year under the agreement is determined by a complex formula. One component of that formula is the Non-Participating Manufacturer adjustment, which is potentially available in the event that all of the Participating Manufacturers in the aggregate lose more than two percentage points of market share compared to 1997.

For the years 2003, 2004 and 2005, an economic consulting firm (The Brattle Group) appointed under the Master Settlement Agreement has rendered its final and non-appealable decision that the MSA was a "significant factor contributing to" the market share loss of the Participating Manufacturers for 2003, 2004 and 2005. As a result, the Original Participating Manufacturers are entitled to a Non-Participating Manufacturer Adjustment to their 2003, 2004 and 2005 payments. States that prove they have diligently enforced their qualifying escrow statutes during all of 2003, 2004 and 2005 will be able to avoid application of the Adjustment to their payments.

Philip Morris USA is an operating company of Altria Group Inc (NYSE: MO). For more information about Philip Morris USA, its programs and positions on tobacco-related issues, please visit us at www.philipmorrisusa.com.

SOURCE: Philip Morris USA

Philip Morris USA
Media Relations
804-484-8897

North Carolina-based RJR also made its payment of $2.25 billion but deposited the disputed amount of $431 million into a separate account, as allowed under the settlement agreement. It is the third year the maker of Camel, Kool and other brands deposited a portion of its payment into a disputed account.

Copyright 2008 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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The deal, which is expected to close by the end of the second quarter, is subject to approval by the European Commission and other local regulatory agencies.

The stock closed Tuesday at $50.07. Tomi Kilgore tk1

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