Barclays Quick Gauge of Potential Opportunities: IT, IHS, GEO, CXW Worth the Extra Look

Barclays on U.S. Business & Information Services: A Quick Gauge of Potential Opportunities; IT, IHS, GEO, CXW Worth the Extra Look

Barclays analyst, Manav Patnaik, said, "In light of the uncertain macroeconomic backdrop and volatile stock market, we present scenarios in an attempt to gauge potential opportunities for our covered stocks...we believe that Gartner (NYSE: IT), GEO Group (NYSE: GEO), IHS Inc. (NYSE: IHS), and Corrections Corp of America (NYSE: CXW) are worth the extra look for the long-term investor. In our view, Dun & Bradstreet (NYSE: DNB), Equifax (NYSE: EFX), Fair Isaac (NYSE: FICO) and KAR Auction Services (NYSE: KAR) are more value opportunities, given the impact of the macroeconomy on their performance, but they could see further downside risk as the potential negative economic outlook crystallizes."

"Although it's perhaps early to gauge long-term impacts, companies we have spoken with have indicated that they are not seeing material changes in customer behavior as yet. As a result we will likely wait for 3Q earnings and data points to get a better sense of the outlook. A key concern for us, and as noted by Barry Knapp as well, is that there is a legitimate question about the impact of the debt ceiling debate, market turmoil, and sovereign downgrade on consumer and business confidence."

"Finally, in tough times "cash is king," and accordingly we are basing our new price targets on P/FCF-share multiples - appropriate for our companies' business models as well. For the more mature information services companies we apply low double-digit multiples, while for the faster growing IHS and IT we stick to mid-teens. Prison companies are solid cash flow generators as well, but given the state budgetary pressures and their relatively higher leverage, a low double-digit multiple is appropriate. We apply a 9x multiple for KAR, given strong industry headwinds and higher leverage."

Barclays rates Services/(Business & Info) Sector at 'Neutral'

Barclays maintains an Overweight, but lowers price targets on�DNB from $96 to $80, IT from $50 to $42,�and GEO from $30 to $28

Barclays maintains an Equalweight, but lowers price target on CXW from $28 to $25, EFX from $40 to $33, FICO from $28 to $25, IHS from $90 to $85 and KAR from $18 to $16.

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