10/23/2008 - Upgrade & Downgrade (Update 2)

From theflyonthewall:

Analyst upgrades:


1. Keefe Bruyette upgraded shares of Colonial Bancgroup (NYSE: CNB) to Outperform from Market Perform on valuation following the recent weakness and believes the company will be eligible to receive TARP funds. Morgan Stanley believes the company's valuation adequately reflects risk to the loan portfolio; the firm raised shares to Equal Weight from Underweight.
   
   
2. Merrill upgraded Ericsson (NASDAQ: ERIC) and ASML Holding (NASDAQ: ASML) to Buy from Underperform and believes their valuation reflects the worst-case for bad news.
   
   
3. Oppenheimer upgraded Trimble Navigation to Outperform from Perform on valuation as they believe the company's long-term growth story is intact.
   
   
4. Celestica (NYSE: CLS) was upgraded to Sector Outperformer from Sector Performer at CIBC.
   
   
5. KeyCorp (NYSE: KEY) was added to Goldman's Conviction Buy List.
   
   
6. Wachovia raised EastGroup Properties (NYSE: EGP) to Outperform from Market Perform.

Analyst downgrades:


1. UBS cut Barclays (NYSE: BCS) to Neutral from Buy as they believe capital raises could negatively impact earnings and that the dividend is likely to be cut.
   
   
2. JP Morgan downgraded Discovery Holdings (NASDAQ: DISCA) to Underweight from Neutral based on valuation and the deteriorating economic outlook.
   
   
3. Friedman Billings downgraded shares of Janus Capital (NYSE: JNS) to Underperform from Market Perform and lowered its target to $7 from $23 as they see further risk to the downside following the company's weaker-than-expected results.
   
   
4. LKQ Corp (NASDAQ: LKQX) was cut to Sector Perform from Outperform at RBC Capital.
   
   
5. Affymetrix (NASDAQ: AFFX) was lowered to Sell from Hold at Deutsche Bank.
   
   
6. RightNow Tech (NASDAQ: RNOW) was downgraded at Baird to Neutral from Outperform.

From Standard & Poor's Equity Research:

Amazon.com, Inc. (AMZN)

Citigroup cuts target, reiterates buy

Amazon.com (AMZN) reported third-quarter EPS of 27 cents. Citigroup analyst Mark Mahaney says Amazon's $4.26 billion in revenue was slightly lower than his $4.28 billion estimate and Wall Street's forecast of $4.27 billion; the 27 cents GAAP EPS would have been in line with the Street's 25 cents estimate if adjusted for a $24 million forex re-measurement gain. Mahaney notes the big surprise in the report was Amazon's guidance, with the company lowering midpoint fourth quarter revenue to $6.50 billion vs. the Street's $7.05 billion, and reducing midpoint operating income for the period by 24% to $310 million vs. the Street's roughly $401 million view. Mahaney cut his $1.49 2008 EPS estimate to $1.38, his $1.79 2009 forecast to $1.50, and his $93 price target to $52, implying 21% estimated total return from $43 aftermarket price. The analyst kept his buy rating on the shares.

Cadence Design Systems (CDNS)

Citigroup downgrades to hold from buy

Cadence Design Systems (CDNS) announced an accounting review. Citigroup analyst Terrance Whelan says he's downgrading Cadence to hold from buy and removing it from the firm's Top Picks Live list, as Cadence's accounting review of first quarter revenues removes three of four catalysts behind his upgrade on Aug. 17. Whelan says the accounting review freezes stock buybacks and casts doubt on results/guidance timing. Also, the Oct. 16 management exodus was deeper and potentially more disruptive than he expected. According to the analyst, this leaves Cadence's October cost cuts as a near-term catalyst, but this appears already modeled and "known" by Wall Street. Whelan cut his $11.50 price target on the shares to $5.50.

Tractor Supply Co. (TSCO)

Raymond James ups to outperform from market perform

Tractor Supply (TSCO) posted third-quarter results that beat Wall Street expectations. Raymond James analyst Dan Wewer says Tractor Supply's EPS of 53 cents was well ahead of his and Street's 47 cents forecast. He notes two sources of the EPS upside were a 6.2% same-store sales gain and better-than-anticipated expense management. Wewer notes inventory productivity improved for the fourth consecutive quarter. He says the company's improved inventory management and greater focus on controlling expense increases during this cycle are impressive. The analyst raised his 2008 EPS estimate to $2.58, and 2009's to $2.88, to reflect better-than-anticipated year-to-date performance. He has a $38.50 price target on the shares.

S&P UPGRADES OPINION ON SHARES OF AMAZON.COM TO BUY FROM HOLD

AMZN; $49.99

Amazon.com posts third quarter EPS of $0.27 vs. $0.19, a penny higher than our estimate. Sales grew 31%, in line with our projection, driven by impressive growth in electronics. Given expected weakness in consumer spending and a projected headwind from forex, we are lowering our 2008 and 2009 operating EPS estimates to $1.35 and $1.63, from $1.41 and $1.77. We are also cutting our discounted cash flow (DCF)-based 12-month target price by $5 to $62. However, we think the shares are now attractive after a severe decline so far in 2008, as we think market-share gains will lead to significant long-term operating margin improvement. /M. Souers

S&P REITERATES HOLD OPINION ON ADSS OF BAIDU.COM

BIDU; $237.08

Baidu.com posts third quarter earnings per American Depositary Share (ADS) of $1.47 vs. $0.70, well above our $1.15 estimate. Revenues rose 85%, in line with our forecast. The company's operating margin was also notably higher than our projection, reflecting scale in the business. Baidu.com indicated its businesses have not been materially impacted by the global financial crises, but noted that certain export customers have been adversely affected. We are raising our per-ADS profit estimates for 2008 to $4.62 from $4.23 and 2009 to $6.79 from $6.46, and setting an 2010 projection of $9.93. Our 12-month target price remains $300. /S. Kessler

S&P REITERATES HOLD OPINION ON SHARES OF UNITED PARCEL SERVICE

UPS; $46.39

Third quarter EPS of $0.96 vs. $1.05 beats our $0.89 estimate, as fuel surcharges helped revenue growth and salaries and wages were well controlled. UPS expects a challenging environment and thinks 2008 EPS should be "toward the lower end" of its previous guidance of $3.50-$3.70. We are cutting our 2008 and 2009 EPS estimates to $3.55 and $3.60, respectively, from $3.58 and $3.75, and our 12-month target price to $50 from $60; 13.8X our 2009 EPS estimate, below both the S&P 500 and the low end of UPS's 5-year historical P/E range of 17.0X-30.4X trailing EPS, to reflect the economy. /J. Corridore

S&P MAINTAINS STRONG BUY OPINION ON SHARES OF NOBLE CORP.

NE; $5.59

Noble Corp. posts third quarter EPS of $1.47 before $0.04 of one-time charges, vs. $1.18, $0.19 shy of our estimate. Results were led by higher dayrates for jackups and floaters, partly offset by weaker utilization. Contract drilling operating expense came in at approximately $54,000 per operating day, down 1.3% from Q2, which we view as a strong cost control performance. Notably, Noble said that it is seeing incremental tender activity in all its major jackup markets, which we think bodes well for potential renewals in 2009. We will update following today's 2 PM conference call. /S. Glickman

S&P MAINTAINS SELL RECOMMENDATION ON SHARES OF ALLSTATE CORP.

ALL; $28.23

Allstate posts a third quarter operating loss of $0.35 vs. operating EPS of $1.54, missing our $1.00 EPS estimate, mainly due to $1.8 billion of catastrophe claims, as, in our view, Allstate's broad market presence is difficult to effectively reinsure. We remain concerned about credit quality and liquidity in Allstate's investment portfolio, despite recent "risk mitigation" efforts. We are cutting our 2008 operating EPS estimate by $1.45 to $3.60, and 2009's by $0.60 to $5.20. We are raising our target price by $3 to $26; 0.9X estimated 2008 tangible book value - the low end of historical averages. /C. Seifert

S&P UPGRADES OPINION ON PULTE HOMES SHARES TO BUY FROM HOLD, ON VALUATION

PHM; $9.95

Pulte posts a third quarter loss of $1.11 per share vs. a $3.12 loss, after $266M in asset impairments, wider than our $0.33 loss estimate. Pulte again reduced debt by $300M and has $1.2B in cash, with a target of $1.6B-$1.8B by end of 2008. Third quarter homebuilding revenues declined 37% year-over-year, but was flat with Q2. With Pulte's net orders down, we forecast a 35% sales decline for full-year 2008, followed by a further 24% decline in 2009. We are widening our 2008 loss estimate to $5 from $4 and 2009's loss to $1 from $0.50. Applying a price-to-book slightly above 1X, we are lowering our target price to $13 from $14. /K. Leon, CPA

Related Posts :

1. 10/22/2008 - Upgrade & Downgrade (Update 1)
2. 10/21/2008 - Upgrade & Downgrade

Sources :

1. BloggingStocks: Analyst calls: CNB, ERIC, ASML, TRMB, BCS, DISCA, JNS, RGEN, GPS and NTY, October 23, 2008
2. BusinessWeek: Analyst Actions: Amazon.com, Cadence Design, Tractor Supply, October 23, 2008, 12:34PM EST
3. BusinessWeek: S&P Picks and Pans: Amazon.com, Baidu.com, UPS, Allstate, October 23, 2008, 09:52AM EST

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