CIBC World lowers PetCo Animal Supplies (PETC) to sector perform from sector outperform.
Analyst Daniel Wewer says he downgraded on price. He notes the stock has risen 48% since he initiated coverage of the stock, and is trading at the high end of the hardline retail group Wewer anticipates a more cautious comparison outlook and heavier expenses as PetCo steps up its relocations and remodeling efforts.
Although he supports PetCo's decision to reinvest, which is prudent, this will be at the expense of near-term earnings before interest and taxes growth. Wewer cut the 26 cents first-quarter earnings per share estimate to 24 cents. He says he'd be more constructive once PetCo's valuation becomes more attractive and operating income growth momentum revives.