From Standard & Poor's Equity Research
Oracle Corp. (ORCL) : Maintains 4 STARS (buy)
Analyst: Z. Bokhari
August-quarter operating EPS of 17 cents (after options) vs. 14 cents is one cent above our view. Non-GAAP revenues grew 26% to $3.66 billion, above our $3.49 billion forecast, aided by acquisitions and strong organic growth in applications and database and middleware segments. We are raising our fiscal 2007 (May) revenue estimate to $17.5 billion from $17 billion, reflecting August-quarter results and stronger-than-expected November-quarter guidance, and our operating EPS estimate to 93 cents from 90 cents. We are setting our fiscal 2008 estimate at $1.06. Our 12-month target price rises $3 to $22, a 1.6X PEG multiple on our fiscal 2007 estimate, assuming 15% long-term earnings growth.
Movado Group (MOV) : Cuts to 3 STARS (hold) from 4 STARS (buy)
Our downgrade is based on valuation. We see strength in Movado Group's luxury and premium fashion watch brands driving at least 10% sales growth in FY 07 (Jan.) and FY 08. We also look for operating margins to widen on sales growth in the company's higher-margin brands and retail operations, despite planned investments in new products and marketing support. But we think these positive factors are well reflected in Movado Group's share price, which is up roughly 38% year to date. We are reiterating our $1.62 FY 06 and $1.80 FY 07 EPS estimates, and keeping our 12-month target price at $26.
Standard Motor Products (SMP) : Cuts to 2 STARS (sell) from 4 STARS (buy)
Analyst: E. Levy-CFA
Our lower investment recommendation reflects valuation, with Standard Motor Products's shares up more than 50% since the end of July. The price of the shares now exceeds our 12-month target price of $10, derived from a weighted blend of DCF and P/E analyses. We believe revenues in Standard Motor Products's temperature-control segment were likely lower year-to-year in the current quarter as seasonal temperatures were not as high. Even so, we continue to project Q3 EPS of $0.26 vs. $0.21, and to estimate operating EPS of $0.63 for full '06, and $0.80 for '07, vs. a loss per share of $0.09 in '05.
Target (TGT) : Maintains 4 STARS (buy)
With TGT now forecasting a healthy 5% same-store sales rise in October, at the high end of its prior 3%-5% guidance, we have increased confidence in our positive outlook for the company. We believe that a combination of lower gasoline prices and TGT's attractive mix of fashion apparel and food/consumables is driving growth in both store traffic and average basket. Based on our higher forward sales projections, we are increasing our FY 07 (Jan.) EPS estimate by $0.02 to $3.12, and FY 08's by $0.03 to $3.58. We are raising our DCF-based target price by $7 to $62.
Microchip Technology (MCHP) : Reiterates 5 STARS (strong buy)
In the wake of the Thailand military coup, Microchip widens its September-quarter revenue guidance from 4% growth from the June quarter, to a range of flat to 4% growth. Microchip does about two-thirds of its assembly and test production work in Bangkok and may be subject to transportation disruptions. We are reducing our 4% September-quarter sales growth estimate to 2%, but raising December-quarter to 5% from 4%, assuming that some sales will be pushed into that period from the September quarter. We are trimming our fiscal 2007 (March) EPS estimate by a penny to $1.50, and our 12-month target price, based on price-to-sales and p-e ratios, by $1 to $45.
Jo-Ann Stores (JAS) : Cuts to 3 STARS (hold) from 4 STARS (buy)
Analyst: M. Souers
The shares have increased more than 40% thus far in 2006 following a severe decline in 2005, and we now view them as fairly valued. We believe that difficult industry and macroeconomic conditions will persist well into 2007, and that Jo-Ann Stores will have difficulty leveraging expenses on lackluster same-store sales results. We are maintaining our fiscal 2007 (January) estimate of a per-share loss of 28 cents but see EPS of 14 cents in fiscal 2008. Based on our discounted cash flow analysis, our 12-month target price remains $18.