From Standard & Poor's Equity ResearchBAIRD DOWNGRADES ADC TELECOMMUNICATIONS TO NEUTRAL FROM OUTPERFORM
Baird analyst Kenneth Muth says ADC Telecommunications (ADCT) cut its outlook based on lower volume and a mix shift at U.S. customers (like AT&T (T) and Verizon (VZ).
Muth says the slight shortfall in revenue and much larger shortfall on EPS suggest that a mix shift rather than lower capex is driving reduced outlook. He says given the company's reliance on margin expansion to drive EPS growth, the current mix shift could limit EPS growth.
He models fiscal year 2008 (October) revenue/EPS toward the low end of management's new guidance at $1.50 billion and $1.15, down from $1.53 billion and $1.31. Given the lack of visibility into the length of current mix shift, he conservatively lowers fiscal year 2009 revenue and EPS estimates to $1.57 billion and $1.20, from $1.6 billion and $1.38. He also cuts his price target to $14.
BAIRD CUTS ESTIMATES, KEEPS NEUTRAL ON VMWARE
Baird analyst Jayson Noland says VMware's (VMW) $456 million second quarter revenue is below $459 million consensus and EPS is in line. He says management saw push-outs and reluctance to commit to large deals which it attributes primarily to macro-economic headwinds.
Also, management provided third quarter guidance of $462-$468 million revenue and 2008 revenue growth of 42%-45%; below third quarte consensus view of $498 million and the company's previous 50% 2008 revenue growth view.
Noland says VMW's growth trajectory has clearly been difficult to model. He cuts 2008 estimates to $1.87 billion revenue/$0.88 EPS from $1.97 billion/$1.05. He says his 2009 and 2010 estimates are now $2.42 billion/$1.18 and $2.95 billion/$1.57, respectively.
He maintains a neutral opinion; he would wait to recommend purchase given valuation, Microsoft (MSFT) headline risk, and macro-economic concerns.
JP MORGAN DOWNGRADES C.H. ROBINSON WORLDWIDE
JPMorgan analyst Thomas Wadewitz says he's downgrading CH Robinson Worldwide (CHRW) to neutral from overweight following its second quarter earnings report, which revealed gross margin pressures. He notes $0.52 second quarter EPS was meaningfully below his and consensus estimate of $0.55, as a tighter truckload market and higher fuel drove 250 basis points of gross margin deterioration in the Transportation segment.
He suspects that the gross margin pressures and slower EPS growth are likely to continue for a few more quarters, and does not expect a quick return of EPS momentum.
As such, he cuts his $2.15 2008 EPS estimate to $2.10 and $2.50 2009 to $2.40, and sees CHRW stock sidelined for a few quarters prior to renewed EPS momentum.