Avondale cut its investment opinion on CSS Industries (CSS) to market perform from outperform on Monday, citing the company's earnings per share growth outlook.
Analyst Denise Warren said the company cut its 20% to 25% fiscal year 2006 (ending March) earnings per share growth forecast to between 13% and 18%. She noted that it cited 1) a product mix shift from higher margin to lower margin items and 2) production cost increases amid rising fuel costs at peak shipping time. She cut her $3.00 fiscal year 2006 earnings per share estimate to $2.75, and her $3.16 fiscal year 2007 estimate to $2.85. Warren believes there could be continued earnings risk should Wal-Mart Stores (WMT), a 26% customer, not produce acceptable earnings per share performance. She believes Wal-Mart would ask its vendors to shoulder some of the burden of its lost business. She cut her $43 price target to $38.