From Standard & Poor's Equity Research
Sprint Nextel (S) : Cuts to 4 STARS (buy) from 5 STARS (strong buy)
Analyst: Kenneth Leon, CPA
Second quarter earnings per share (EPS) of 32 cents vs. 30 cents, before special items, is in line with our estimate. Net subscriber adds for postpaid plans of 210,000 was well below our 600,000 target. We think Sprint is revamping a strategy to improve its above-peer monthly customer churn and to have one service offering instead of separate ones for Sprint and Nextel customers. We see flat revenue and earnings before interest taxes depreciation and amortization (EBITDA) growth for the rest of 2006. We are lowering our 2006 EPS estimate to $1.15 from $1.35. With Sprint's new $6 billion stock repurchase plan and shares priced near peers on a price-to-earnings basis, we are lowering our target price to $21 from $26.
Nike (NKE) : Cuts to 3 STARS (hold) from 4 STARS (buy)
Analyst: Mark Basham
We believe today's profit warning from Foot Locker (FL) amid softening U.S. demand is likely to lead footwear and sporting goods retailers to tighten up on inventory and trim new orders from vendors like Nike. We are trimming our fiscal year 2007 (ending May) revenue growth forecast to 7.2% from 8%, and lowering our EPS estimate to $5.55 from $5.60. In fiscal year 2008, we look for further moderation in revenue growth to between 3% and 5%, with EPS of $5.90, down from our prior $6.05 estimate. We are lowering our target price by $15 to $90.
OfficeMax (OMX) : Ups to 3 STARS (hold) from 2 STARS (sell)
Analyst: Michael Souers
Excluding special items, OfficeMax posts second quarter EPS of 29 cents vs. a net loss of 14 cents, 23 cents higher than our forecast. While sales declined 2.4%, including a comp-store decline in the OfficeMax's Retail division of 1%, the company was able to focus on profitable sales and cost cutting to achieve strong improvement in operating margins. We are impressed by the pace of OfficeMax's turnaround given the rather tepid sales environment, and are increasing our 2006 and 2007 operating EPS estimates to $2.12 and $2.39 from $1.67 and $1.91, respectively. We are also raising our target price by $6 to $44.
Federal Realty Trust (FRT) : Cuts to 3 STARS (hold) from 4 STARS (buy)
Analyst: Robert McMillan
Second quarter per-share funds from operations of 83 cents vs. 77 cents matches our estimate. Results benefited from a 10% jump in rental income amid strong retail conditions. Occupancy levels continued to rise, increasing to 94.7% at the second quarter-end, vs. 91.5% last year. Rent on lease rollovers jumped 17%. We look for retail conditions to remain robust into 2006, and see healthy condo sales at the company's developments. We are keeping our 2006 and 2007 FFO (the profit allocated to each outstanding share of common stock) estimates at $3.38 and $3.63. But we are increasing our 12-month target price by $2 to $76.
Medtronic (MDT) : Cuts to 3 STARS (hold) from 4 STARS (buy)
Analyst: Robert Gold
We expect the stock to be under pressure, as Medtronic lowers its July quarter sales and EPS guidance. Medtronic now sees revenues up 8% to $2.9 billion, below our $3.0 billion forecast, with EPS of 53 cents to 55 cents, compared with our 59 cents forecast. We are surprised by the magnitude of the U.S. ICD weakness, where sales fell 13%, outweighing strong non-U.S. ICD sales. Despite a favorable Medicare ICD reimbursement outlook, we think the U.S. ICD market will stay weak for a few more quarters. Our fiscal year 2007 (April) EPS estimate falls by 10 cents to $2.35, and fiscal 2008's drops by 10 cents to $2.75. Our 12-month target price falls by $10 to $50.
Las Vegas Sands (LVS) : Ups to 3 STARS (hold) from 2 STARS (sell)
Analyst: Thomas Graves, CFA
Before special items, second quarter EPS of 34 cents vs. 27 cents is 2 cents above our estimate. We are raising our 2006 EPS projection to $1.46 from $1.44, and our 2007 estimate to $2.00 from $1.95. In both years, we expect most of Las Vegas Sands's operating profit to come from Macau. In 2007, we look for Las Vegas Sands to open a new casino/hotel in Macau, plus another in Las Vegas. Also, we are being becoming more optimistic about longer-term projects in Macau's Cotai area. We are raising our 12-month target price to $63 from $58. Our sum-of-the-parts approach includes the possible sale of retail space in Macau.