From Briefing.com: 4:20 pm : What began as a day with no specific news to account for the lack of early buying interest, growing concern that the market got ahead of itself yesterday, especially amid uncertainty as to when the Fed will stop raising interest rates, sparked broad-based consolidation.
Again looking to the Treasury market for direction, a rise in borrowing costs provided an incentive for investors to take profits in the very bank and brokerage stocks that helped pace yesterday's relief rally. Even though an unexpected decline in weekly jobless claims does not change views on the economy, a sixth straight read below the 300K level reflecting a strengthening labor market, coupled with a tepid 5-yr note auction, prevented the 10-yr note (-09/32) from recovering from session lows to yield 4.55%.
Oil prices were also in focus heading into the EIA's rescheduled weekly oil report but the commodity traded in erratic fashion throughout much of the session as the data showed supplies were sufficient to replenish reduced shipments from Nigeria. However, even though oil prices pared some of their losses late in the day, the Energy sector's inability to take notice and perhaps provide a floor of influential support only added to the market's late-day breakdown that helped erase Wednesday's gain on the Dow.
Of the other six sectors underperforming on the day, Technology paced the way lower as investors locked in semiconductor and hardware gains. Deere & Co (DE 77.81 -1.08) reducing its Q2 EPS outlook weighed on Industrials while Health Care was another influential leader to the downside. Market participants viewed strong earnings from Express Scripts (ESRX 88.43 -5.48) as a reason to lock in gains which lifted the stock to a historic high yesterday.
Despite strong earnings reports from Limited Brands (LTD 24.15 +0.74) and Toll Brothers (TOL 33.58 +1.09), continued weakness in autos and a disappointment from recently divided media giant Viacom (VIA.B 40.99 -0.91) weighed on Consumer Discretionary. Even Materials closed lower, as weakness in gold eventually offset an analyst upgrade on the steel industry.
Consumer Staples, though, eked out a modest gain, benefiting from better than expected earnings and encouraging guidance from Safeway (SWY 24.35 +1.10). Nonetheless, the sector's defensive nature and SWY's undue influence on the broader market did little to divert the market's attention from the reality that profit expectations for this year need to be lowered and that more Fed tightening is on the horizon. BTK +0.2% DJ30 -67.95 DJTA -0.4% DJUA -0.5% DOT -0.5% NASDAQ -3.85 NQ100 -0.3% R2K -0.2% SOX -1.2% SP400 -0.3% SP500 -4.88 NASDAQ Dec/Adv/Vol 1649/1378/1.79 bln NYSE Dec/Adv/Vol 1881/1405/1.57 bln
5:12PM Pericom Semi initiates search for new independent registered public accounting firm (PSEM) 9.17 -0.01 :
12:56PM Rambus: Micron Technology brings lawsuit against Rambus in Italy (RMBS) 30.02 +1.76 : Micron Technology (MU) announced that it has brought a new lawsuit against RMBS in the Court of Milan, Italy. In the suit, Micron and its Italian subsidiary, Micron Technology Italia, S.r.l., seek more than $30 mln in damages and interest relating to a preliminary patent infringement action initiated by Rambus in September 2000. Micron's complaint alleges that Rambus wrongfully obtained an order to seize certain materials from a Micron facility in Avezzano, Italy, while knowing that the Court of Monza, Italy, lacked jurisdiction over Micron. The complaint further alleges that the Court of Monza granted the order, at least in part, in reliance on Rambus misrepresentations, and that Rambus enforced the seizure order in bad faith causing injury to Micron. The Monza judge ultimately held on the merits that Micron's memory products did not infringe the Rambus patent. The European Patent Office later invalidated and revoked the Rambus patent at issue in the Italy proceeding, and has preliminarily revoked two other Rambus patents on the basis that Rambus improperly attempted to expand the claims of the patents. Separately, a court in London, England, dismissed Rambus' patent infringement suit after the European Patent Office revoked the patent, and the court recently awarded Micron costs.
10:21AM Research In Motion: NTP Comments on RIMM's "Mischaracterizations" Regarding Patent Office (RIMM) 71.55 -1.51 : NTP Incorporated announced it has addressed "numerous mischaracterizations" by RIMM with respect to the validity of the NTP patents awarded to NTP's inventor, Thomas Campana. NTP says that "RIM, in a number of forums, has inaccurately characterized the validity of the NTP patents. In the 2002 trial, where RIM litigated the validity of the NTP patents, both the jury and District Court ruled the patents to be valid. The United States Court of Appeals also affirmed the determination regarding the validity and infringement of the NTP patents. The initial and ongoing review by the U.S. Patent and Trademark Office is the first step in the lengthy process of Reexamination... NTP has confidence that the Patent Office Board of Appeals should correct the patent examiners who have made serious mistakes in their initial determination and this correction will result in NTP's patents being upheld. Moreover, any decision of the Board of Patent Appeals is correctable by the federal courts. And, as previously noted, the federal court system is the final arbiter in the matter. NTP believes that RIM has utilized its money, power and political influence to overcome its complete defeat in the court system and to inappropriately influence the U.S. Patent Office process. RIM's actions underscore the lack of merit in RIM's legal positions."
2:42 pm Fannie Mae (FNM)
57.59 +1.68: Fannie Mae's purpose in business life seems simple enough: to facilitate home ownership for low to middle-income consumers by buying and holding mortgages and selling mortgage-backed securities. The process of running its business, though, is anything but simple. That much is evident in the fact that it took law firm Paul, Weiss, Rifkind, Wharton & Garrison, LLP, 616 pages to provide perspective on Fannie Mae's accounting, governance, structure and internal controls. Paul, Weiss put forth that effort at the behest of Fannie Mae itself, which came under scrutiny from regulators for its improper accounting practices.
In its report, Paul, Weiss concluded that [prior]... "management's practices in virtually all of the areas reviewed were not consistent with [Generally Accepted Accounting Principles] and, in many instances, management was aware of the departures from GAAP." Additionally, it was found that the former CFO and Controller were primarily responsible for the departure from GAAP, but that the former Chairman and CEO "contributed to a culture that improperly stressed stable earnings growth." On that note, Paul, Weiss observed that there was ample evidence found to support the conclusion that the adoption of certain accounting policies was "motivated by a desire to show stable earnings growth, achieve forecasted earnings, and avoid income statement volatility."
We could go on much further about the accounting transgressions at Fannie Mae, but the bottom-line is that the Paul, Weiss report crystallizes what is an embarrassing chapter in Fannie Mae's history. The company admitted as much and made a concerted effort to highlight all of the changes that have taken place in the last year with respect to management, corporate culture, and regulatory oversight.
On the bright side, it is the conclusion of the Paul, Weiss report that the company's principal problematic accounting issues have already been disclosed. Nonetheless, a caveat was issued by the company that it is still proceeding with its restatement process and that it expects additional matters to be identified that weren't covered in the Paul, Weiss report.
With Fannie Mae's stock up today, it can be said that the market is understanding of that likelihood and that it is intent on looking ahead at this juncture more so than it is on looking back. That's not to say FNM will go straight up from here, as investors can expect to encounter some disappointments along the way. However, with a good portion of its dirty laundry aired in the Paul, Weiss report, and a new management team in place that is intent on changing the corporate culture and ensuring compliance with GAAP reporting procedures, there is an emerging sense of confidence that Fannie Mae's accounting can again be trusted and that its darkest days are behind it. That consideration is providing support for the stock, which is up 39% from the 52-week low it reached last September.
--Patrick J. O'Hare, Briefing.com
1:55 pm OfficeMax (OMX)
(Correction: Yesterday, Briefing.com wrote a Headline Hit for OfficeMax and incorrectly stated that the company hadn't opened any stores in the past five years. What should have been said is that OfficeMax has opened stores during that time, but on a net basis, has fewer stores today than it did five years ago. The story has been re-printed below and has been updated to account for the misstatement.)
30.80 +0.15: On January 24th OfficeMax detailed a turnaround plan to attain stronger operating and financial performance. Besides closing 110 underperforming stores during the first quarter of 2006, the struggling company plans to develop a single supply chain for its retail and business customers, upgrading its inventory management system, as well as implementing a major IT overhaul -- key initiatives which could boost fiscal 2006 earnings by as much as $100 mln before taxes. This morning, the nation's No. 3 office supplies retailer inched one step closer to turning itself around following several years of missed execution by actually matching analysts' expectations. The Itasca, Illinois-based company had missed Wall Street's forecasts for five consecutive quarters.
Excluding multiple non-recurring items, OfficeMax reported Q4 (Dec) earnings of $0.07 per share, in line with the Reuters Estimates consensus. Revenues fell 8.7% year/year to $2.46 bln but checked in above the $2.35 bln consensus. Contract segment sales increased 9.4% in Q4, benefiting from five additional selling days in the period, while improved expense controls, which more than offset declines in gross margin due to competitive pricing and higher delivery costs from increased energy prices, helped the Contract segment's operating profit increase nearly 50% to $30 mln. OfficeMax Retail segment sales increased 6.8% year/year as strength in Print and Document Services helped offset varying sales performance among geographic regions and flat same-store sales in most product categories.
Based on improved Contract and Retail results, CEO Sam Duncan believes that OfficeMax is positioned to achieve the 2006 and intermediate-term goals outlined in its turnaround plan. Management expects 2006 total consolidated sales to be flat to slightly up from the $9.16 bln in 2005 (consensus $9.17 bln), Retail segment same-store sales growth to be in the low single digits and Contract segment sales growth to be in the mid-single digits.
Unlike competitors Staples (SPLS) and Office Depot (ODP), which have opened hundreds of stores and trade at more attractive forward P/E multiples of 20x and 21x, respectively, OfficeMax had approximately 50 fewer stores at the end of fiscal 2005 than the approximately 1,000 locations that were open in January 2001, and trades at 29x estimated fiscal 2006 EPS of $0.96. Also, keep in mind that the company's closest rival, Office Depot, reported earlier this month that its Q4 profits more than doubled and that it plans to acquire a controlling stake in South Korea-based Best Office Co to boost overseas sales and garner an even larger chunk of the $300 bln office products market. Our view on OMX is neutral at this juncture, as we want to see further signs of progress with its restructuring initiatives.
--Brian Duhn, Briefing.com
12:26 pm Salesforce.com (CRM)
33.71 -0.69: Salesforce.com, a leading provider of on-demand customer relationship management services, reported higher fourth quarter profits, helped by a 76% increase in paying subscribers. However, the company's outlook for the current quarter and full year fell below analysts' expectations. Salesforce shares are down about 23% since reaching a 52-week in late January. At the current level, the stock is trading at roughly 137x forward earnings and sports an unfavorable price/earnings-to-growth ratio of 3.18.
Fourth quarter earnings rose 66% to $5.96 million, or $0.05 per share. That is up from earnings of $3.59 million, or $0.03 per share, in the year ago period. Total revenue was $91.1 million, an increase of 67% year/year and 10% from the previous quarter. The results matched analysts' projections for earnings of $0.05 per share, but came in slightly below the consensus estimate for revenue of $91.7 million.
Top line growth for the quarter was augmented by higher customers and paying subscribers. Customers rose a record 1,800 to approximately 20,500, while paying subscribers rose a record 48,000 to 399,000. That represents an increase of 47% and 79%, respectively, from the same period last year.
For the first quarter, Salesforce sees earnings, excluding stock based compensation, in the range of $0.02 to $0.04 per share on revenue between $99 and $101 million. Analysts, however, are forecasting earnings of $0.05 per share and revenue of $101.79 million, according to Reuters Estimates. For the fiscal year, earnings are expected to be approximately $0.20 to $0.22 per share on revenue of $470 to $475 million. That compares with the consensus estimate for earnings of $0.24 and revenue of $473.99 million.
--Richard Jahnke, Briefing.com
12:20 pm Safeway (SWY)
24.43 +1.18: For its fourth quarter, Safeway (SWY) registered $0.51 in earnings per share. That figure excludes $0.12 in store exit activities and employee buyouts primarily in Dominick's and Northern California, and exceeded analysts' average estimate by four cents. Versus the comparable period, EPS grew about 13%. Driven by the company's marketing strategy, Lifestyle store execution, and increased fuel sales, the grocer's total revenues increased a better than expected 5.8% to $12.0 billion. Comparable store sales rose 5.4%. Identical store sales, which exclude the effect of replacement stores, rose 5.1%. Excluding the effect of fuel sales, comparable and identical store sales increased 3.9% and 3.7%, respectively.
Safeway's Lifestyle stores, which emphasize fresh and organic foods, contributed significantly to top line growth over the year. In 2005, the company opened 21 new Lifestyle stores and completed 293 Lifestyle remodels. That concept enables Safeway to compete within the specialty niche that Whole Foods (WFMI) and Wild Oats (OATS) dominate. As expected, the costs of promoting these stores affected margins. Versus the year-ago period, Safeway's full-year 2005 gross margin contracted 65 basis points to 28.93% while its operating margin declined 11 basis points to 3.16%. Management asserted that, as the Lifestyle stores opened in 2005 mature in 2006, their margins will improve and they will contribute at a higher level to Safeway's operating profit. Other factors behind the margin contraction were higher fuel sales, investment in price, increased advertising expenses, and higher energy costs. Restructured labor agreements and reduced workers' compensation costs were partially offsetting factors during the fourth quarter.
Safeway confirmed its full-year 2006 guidance of $1.55-1.65 in earnings per share. Non-fuel identical store sales are expected to grow 3.0%. Management noted that holiday-timing (Easter) is expected to affect the quarterly pattern of sales and earnings in the first half of the year. Over 2006, Safeway plans to open 20-25 new Lifestyle stores and complete approximately 280 Lifestyle remodels. Free cash flow was $567.5 million in 2005 and is anticipated to be $400-600 million this year. Both the EPS and cash flow forecasts exclude the effect of employee buyouts. According to Reuters Estimates, the FY06 consensus EPS estimate is pegged at $1.57. For the current quarter, the consensus EPS estimate is $0.32.
Currently, SWY shares trade at 15.6x estimated full-year earnings. That valuation is at a slight premium to Kroger's (KR) forward multiple and is in-line with Wal-Mart (WMT). With respect to the specialty niche, Whole Foods (WFMI) trades at 45.2x expected full-year earnings and Wild Oats (OATS) trades at 31.6x expected FY06 earnings. Higher growth prospects in that segment are the basis for the sharp valuation disparity with Safeway whose Lifestyle concept will be key to its growth story and its ability to expand margins.
--Lisa Beilfuss, Briefing.com
10:37 am MGM Mirage (MGM)
38.12 -1.42: Las Vegas-based MGM Mirage on Thursday reported fourth quarter profits rose 31% from a year ago, driven by strong revenue growth across all operating areas. The latest results, which come on the heels of a similarly strong report from the world's largest casino operator, Harrah's Entertainment (HET), reaffirms our positive outlook on gaming stocks, despite our Underweight rating on the Consumer Discretionary sector. MGM is well positioned for growth as gaming demand remains strong and the quality of its resorts continues to attract customers.
For its fiscal fourth quarter, MGM said net income increased to $97.8 million, or $0.33 per share, from $74.9 million, or $0.26 per share, a year earlier. Without hurricane-related expenses and other one-time items, the company earned $0.35 per share - two cents better than the Reuters Estimates consensus.
Revenue rose 65% to $1.75 billion, with same store revenues up 11% to $1.1 billion, as the company continued to benefit from the acquisition of Mandalay Resort Group, as well as strong operating trends at existing resorts. Highlighting the results was a 39% rise in casino revenue, including an impressive 11% increase in slot revenue. Non-gaming revenue, meanwhile, climbed 95% as hotel revenue increased 111% and food and beverage revenue increased 78%, resulting from increased market trends and new restaurants and lounges added since last year.
Based on its recent performance, MGM forecast first quarter earnings of $0.55 per share, ex-items. That is in line with the Reuters Estimates consensus and represents an increase of about 28% from earnings of $0.43 per share in the same period last year.
--Richard Jahnke, Briefing.com
10:19 am CBS Corp. (CBS)
25.20 -0.03: Choice is always a good thing and now that Viacom has split in two, investors can choose the high-growth appeal of the "new" Viacom, or the high cash flows of CBS. It was the latter that won out this round, as CBS reported earnings that actually beat consensus after the Paramount unit weighed heavily on Viacom. CBS's net loss narrowed in the fourth quarter to $9.14 bln from $18.4 bln last year, which included a $9.5 bln charge and $18 bln charge, respectively, to write down the value of its television and radio assets. Excluding items, CBS came in a penny ahead with earnings of 41 cents per share. Revenues grew 2.1% to $3.83 bln assisted by TV and outdoor advertising.
The company anticipates revenue growth in the low single-digits, with mid single-digit operating and earnings growth. This highlights the vast difference between the the growth prospects between networks and cable, as Viacom forecasted double-digit growth. Both companies reported results as if they were standalone companies for the entire year. The write-downs demonstrate the continued pressure traditional media is under in terms of slowing growth trends as alternatives gain acceptance. CBS's appeal is its defensive characteristics, which certainly have merit, but we still prefer growth over value in the space, which speaks to our bullish views of News Corp. (NWS/A) and Disney (DIS) - both suggested holdings in our Active Portfolio.
--Kimberly DuBord, Briefing.com
10:03 am Limited Brands (LTD)
24.31 +0.90: Limited Brands delivered a profit of $1.05 per share for its fourth quarter - a result that topped analysts' forecast by four cents and exceeded the company's own guidance by a nickel. That figure excludes a net $0.23 in one-time items that relate to a tax settlement, an accounting change, and gift card breakage. The company posted net sales of $3.54 billion, slightly ahead of the consensus estimate. Because of a change in its inventory valuation method, which was implemented last quarter, year-over-year comparisons are difficult to make. Limited did note that the EPS it posted under its new method compares to $0.87 in the prior-year period. That translates to about 20% earnings per share growth.
During the quarter, same-store sales rose 3%. Victoria's Secret was its driving force and the apparel segment improved profitability largely due to improvement at Express. A reason behind the accounting change was the belief that the cost method will improve the margin realized on each merchandise sale. Last quarter, Limited's gross margin and operating margin each showed improvement.
For the current quarter, the retailer expects earnings per share to be roughly flat with its profit of $0.16 per share in the year-ago period, which was restated under the cost method of inventory valuation, excluding a $0.04 per share effect from the change in accounting principle. Limited's full-year EPS forecast is pegged at $1.40-1.50. Excluding the estimated impact of a nickel per share in stock-based compensation expenses, the company's 2006 guidance translates to 9-17% year-over-year earnings growth. According to Reuters Estimates, analysts are looking for EPS of $0.07 in Q1 and $1.48 for the full-year. It is unclear whether those estimates are comparable to the company's estimates.
LTD shares are trading at 16.8x estimated 2006 earnings, a slight discount to the Consumer Discretionary sector's 17.1x forward multiple. The stock also trades at a discount to peer Ann Taylor (ANN), which is valued at 22.2x expected 2006 earnings.
--Lisa Beilfuss, Briefing.com
09:18 am Barrick Gold (ABX)
28.94: Higher gold prices and volumes drove profits for the world's largest gold producer in the fourth quarter. With gold prices hovering near $560 per ounce, metal producers have retained their allure, which is heightened further by industry consolidation. Barrick's unsolicited bid for Canadian rival Placer Dome made it the biggest player on the block. Still, the combined entity is off to a rocky start with Barrick forecasting combined gold production of 8.6m-8.9m oz, at an average cash cost of $275-$290/oz. These estimates are lower and higher, respectively, than what industry analysts were forecasting and below PDG's own projections of 9.5 mln oz, after adjusting for asset sales.
Considering the strong production profile of Barrick pre-merger, the outlook will likely disappoint the Street. Most likely the weakness is coming from Placer's assets relative to total production. Further, the entire industry is facing considerable cost inflation, from mining equipment to energy, and lower production will only exacerbate these pressures. Yet, considering the demand for gold as an alternative investment, coupled with Barrick's status and potential production growth, the stock will likely attract more buyers than sellers. There may be some near-term fluctuations as the company digests the Placer merger. Pre-market action today indicates a lower open, which is a function of a two cent miss, production guidance, and lower gold futures.
--Kimberly DuBord, Briefing.com
09:11 am Toll Brothers (TOL)
32.49: Toll Brothers on Thursday said first quarter earnings climbed 49% on strong revenue growth, but contracts slipped amid a slowdown in the nation's housing market. The Horsham, Pennsylvania-based builder earned $163.9 million, or $0.98 per share, for the quarter ended January 31, up from $110.2 million, or $0.66 per share, a year earlier. Total revenues of $1.34 billion increased 35% over the same period last year. The results topped Wall Street's expectations for earnings of $0.92 per share on revenue of $1.33 billion, according to Reuters Estimates.
The company's backlog increased 22% to $5.95 billion at the end of the quarter, however contracts of $1.14 billion declined 21% from a year ago as demand seemingly returned to more normalized levels.
"In 2005, demand for new homes in many markets was propelled to unsustainable levels by speculative buying. We are now on the other side of that slope," said chairman and chief executive Robert Toll in a statement. "Speculative demand has ceased and speculators are now putting their homes back on the market."
Toll Brothers said it is well positioned for growth based on strong demographics, restrictive land approval regulations and its supply of 87,000 lots. However, the company continues to face tough comparisons with last year, which was the best in its history. For 2006, Toll Brothers expects earnings of between $4.77 and $5.26 per share, and return on beginning equity of approximately 30%. That compares with analysts' projections for earnings of $4.90 per share. While the company's latest results topped expectations, the decline in contracts corroborates a continued slowdown in housing demand. As such, we would refrain from committing new money to Toll Brothers and other housing stocks at this time as further corrections in the housing market are likely with interest rates on the rise and demand returning to more normal levels.
--Richard Jahnke, Briefing.com
08:54 am Express Scripts (ESRX)
93.91: The third largest pharmacy benefit manager reported a 37% rise in fourth quarter profits on 18% revenue growth after expanding sales of higher-profit medications. Following a strong report from Caremark (CMX), which benefited from its large exposure in mail-order, Express Scripts turned in a strong end to its fiscal year.
Given their high profit margins, the specialty and generic drugs pose a considerable opportunity for all of the PBMs. Gross profit for each prescription filled by Express in the quarter grew 34% to $2.54 from $1.90 in the prior year's period. Generic prescriptions filled rose to 55% of the total dispensed, up from 52% last year. With a wave of high growth generic drugs coming off patent this year, coupled with price erosion on recent generic launches, PBMs have an opportunity to increase utilization, and hence, improve profitability and earnings growth in FY06 and FY07.
Caremark, Express Scripts, and Medco Health (MHS) are all benefiting from the same market drivers, which have propelled stocks to new highs. We still favor CMX due to its mail-order strength, as well as its discounted valuation. The stock trades at 21.4x forward earnings, compared to MHS at 24.7x and ESRX at 29.8x.
--Kimberly DuBord, Briefing.com
08:48 am Viacom (VIA.B)
41.90: The first to report of the recently divided media giant, the "new" Viacom missed on earnings, but beat on revenues. Investors, however, should take little notice of the fourth quarter results that included numerous one time items and charges related to the separation. Instead, focus on Viacom's strong organic growth, which we feel will be the underlying factor driving price appreciation in 2006.
Management, led by Tom Freston, reiterated annual forecasts of double-digit revenue and earnings growth. The company estimates operating income of $9.61 bln and pro forma operating income, excluding one time items, of $2.60 bln. The earnings per share guidance range of $1.95-$2.00 is slightly below the consensus estimate of $2.02, but given its strong operating momentum and asset quality, the odds remain in Viacom's favor despite the ongoing challenge to turnaround Paramount.
--Kimberly DuBord, Briefing.com
10:12 am AMEDISYS: CIBC Wrld Mkts reiterates Sector Outperform. Target $53 to $47. Firm also cuts their AMED estimates s following Q4 results that came in below their expectations. They are definitely surprised by the magnitude of the earnings miss, which they say was due to a cost issue. They lower their 2006 EPS est to $2.26 from $2.61, to take the near-term margin pressure into account.
10:11 am American Eagle: Kevin Dann initiates Buy. Target $32. Firm starts with Buy based on their channel checks, they think the year is off to a solid start at American Eagle. The firm believes the spring assortment is strong and offers the most newness in the marketplace, which they think gives customers a reason to buy and shop at American Eagle over some of its competitors.
10:10 am MasTec: Kaufman Bros reiterates Buy. Target $10 to $16. Firm is saying that with the sale of its money-losing D.O.T business and the expansion of its in-home platform with the acquisition of Ron's TV, they believe MasTec new business mix offers the opportunity for solid top line growth, while further margin improvement will be levered to superior earnings performance in 2006 and 2007.
10:08 am Campbell Soup: UBS reiterates Neutral. Target $32 to $34. Firm is saying the co's C.A.G.N.Y presentation was in their view the most exciting in their coverage universe. The co disclosed a long anticipated lower sodium initiative, and announced plans to expand the premium selection with refrigerated soups.
10:07 am Avalon Pharma: Stifel Nicolaus initiates Hold. Furm believes AVN944 and the co's AvalonRx technology may hold significant value, but due to limited visibility into the clinical utility of the drug, they believe significant risk factors are inherent in the stock at this time. Based on both a discounted earnings analysis and a technology value comparison to the co's peers, they believe AVRX shares are currently fairly valued.
10:06 am Jack In The Box: Prudential reiterates Overweight. Target $39 to $51. Firm ups target based on their sum of the parts model. They think the market is undervaluing the core restaurant businesses, particularly in light of the strategic changes toward margin and return enhancing franchising.
10:02 am Motorola: Nollenberger Capital initiates Neutral. Firm initiates based on their view that Motorola's current share price fairly reflects the successful turnaround led by Ed Zander and the popular RAZR V3 phone series, and that further improvement in margins and earnings beyond current estimates appears unlikely.
10:00 am AMEDISYS: Oppenheimer downgrades Buy to Sell . The firm said mgmt cited additional costs associated with integrating Housecall and another smaller acquisition (SpectraCare) though they expected costs to be, at a minimum, down sequentially because 3Q05 results included all of Housecall's corporate overhead and severance costs for Housecall employees. The firm says disappointing margins that they suspect will surprise investors as much as us and the announcement that the CFO will be leaving the co add two additional near-term overhangs that warrant a lower target multiple until they better understand the cause of margin erosion in 4Q05 and and the 2007 Medicare reimbursement outlook.
10:00 am TNS Inc: Credit Suisse reiterates Neutral. Target $20 to $18. Firm cuts price target following earnings. The firm says while weakness in the P.O.S has been a continuing concern, it now appears that growth in the I.S.D is slowing more quickly than expected and margin expansion may be limited.
09:57 am First Midwest Banc: AG Edwards upgrades Hold to Buy. Target $39. Firm upgrades based on valuation. The firm says shares of FMBI are down 10% over the past 6 months, while the peer group is up 4%. During this time frame, they say, FMBI ($7.2 billion in assets) has announced the acquisition of Bank Calumet, a $1.1 bln asset bank in the southeast Chicago markets. They believe the current valuation is too focused on near-term noise associated with the Calumet transaction and the securities portfolio restructuring. Long term, they say FMBI has proven to be a quality operator and meaningful competitor in the Chicago markets. |
