From Standard & Poor's Equity ResearchFRIEDMAN BILLINGS DOWNGRADES ALCOA, FREEPORT-MCMORAN, HORSEHEAD
Friedman Billings analyst Amir Arif says while he believes downgrades could be a month early and potential upside of 10% remains, the downside risks have increased, and believes risks assumed to capture remaining 10% potential upside are not warranted. He says fundamentals should ease in the second quarter 2008, and the recent run-up in commodities, which has been driven by investment fund flows, can easily reverse.
At the same time as he downgrades, Arif raises commodity price estimates to reflect the recent run-up in commodities. This in turn, results in higher estimates and higher price targets for aluminum names.
Based on valuations, he downgrades Alcoa (AA), Freeport-McMoRan Copper & Gold (FCX) and Horsehead Holding (ZINC) to market perform from outperform.
BROADPOINT CAPITAL KEEPS NEUTRAL ON DYNAMIC MATERIALS
Broadpoint analyst Avinash Kant says Dynamic Materials (BOOM) posted fourth quarter EPS of $0.56 on revenue of $55.2 mllion, vs. the consensus estimates of $0.57 on $48 million revenue and his $0.55 on $51 revenue estimates, respectively.
He notes its fourth quarter 2007 had a six-week contribution of $6.9 million from recently acquired DYNAenergetics. Excluding the acquisition, fourth quarter revenues grew 15% from the third quarter.
Kant says guidance implies close to 20% organic revenue growth but lower margins. As such, keeps his 2008 revenue estimate at $264 million, but cuts EPS to $2.35 from $2.55. He nelieves long-term fundamentals remain strong, but would wait for lower margin expectations to be factored into the stock before adding to positions. He sees $2.90 2009 EPS.
JMP SECURITIES DOWNGRADES DEALERTRACK HOLDINGS
JMP Securities cuts DealerTrack Holidngs (TRAK) to market perform from strong buy. Analyst David Scharf says he's uncovered new information that tells him recent and potentially future market share losses to RouteOne are more significant than previously thought. He believes RouteOne approached a "tipping point" in September with additions of WB and WFC, and has seen material acceleration in its credit applications by non-captives since then.
Scharf says one of the largest national lenders is likely to undertake a marketing push aimed at convincing dealers to use RouteOne over TRAK. He also notes Big Four captives may have engaged in such a marketing push in the fourth quarter and are promoting RouteOne system upgrades to dealers.
He trims $1.15 2008 EPS estimate to $1.14, and $1.52 for 2009 to $1.35.
MORGAN KEEGAN KEEPS MARKET PERFORM ON MARVELL TECHNOLOGY
Morgan Keegan analyst Harsh Kumar says Marvell Technology (MRVL) posted better-than-expected $0.20 fourth quarter EPS on $844.7 million revenues, with the revenue upside driven by strong storage and Ethernet demand; EPS aided by $0.06 from a one-time liability reversal and a lower-than-expected tax rate.
Kumar also notes Marvell guided for first quarter revenues of $780 million, vs. Street estimates of $763.9 million and his $754 million estimate, with the upside once again tied to storage demand. However, he notes while he's encouraged by the strong revenue trends and feels Marvell is making headway with new products, cost control is still elusive.
He ups his first quarter EPS estimate to $0.12 from $0.11, but trims his $0.62 fiscal year 2009 view to $0.60.