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S&P Picks and Pans: Big Lots, Chico's, Rio Tinto, Corinthian Colleges


Analysts' opinions on stocks in the news Tuesday

From Standard & Poor's Equity ResearchS&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF BIG LOTS (BIG; 31.33):

July-quarter EPS of $0.32, vs. $0.21, beats our $0.26 estimate as improved initial markups drove a higher-than-expected 39.3% gross margin. Retail conditions are tough, but BIG describes the close-out buying environment as good. We continue to expect margin expansion in the second half of the year from cost controls and expense leverage on a projected 2% same-store sales growth. We raise our fiscal year 2009 (January) EPS projection by $0.05 to $2.00 but keep fiscal year 2010's at $2.15. We reiterate our 12-month target price of $35 on peer-p-e valuation. -J. Asaeda

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF CHICO'S FAS (CHS; 4.98):

CHS reports July-quarter EPS of $0.04, vs $0.22, missing our $0.10 estimate. Gross margin fell 500 basis points and SG&A rose 620 basis points on a 7% sales decline, while comp-store sales fell 16%. Despite EPS miss, we heard a number of positive comments on CHS's call. At Chicos, Travelers and jackets are showing signs of improvement; accessories and denim are still weak. At White House, dresses and shoes were strong. Both concepts saw about 200,000 new clients in the July quarter and a favorable response to catalogs and direct mail. We reduce our fiscal year 2009 EPS forecast to $0.26 from $0.34 and maintain fiscal year 2010 at $0.50. -M. Driscoll-CFA

S&P REITERATES STRONG BUY OPINION ON ADSS OF RIO TINTO PLC (RTP; 374.74):

RTP posts first half 2008 earnings per ADS of $17.06, vs. $10.91, on a 115% sales gain, exceeding our $15.11 estimate. Sharply higher profits reflected the inclusion of Alcan and sizable gains in iron ore. On a more optimistic outlook for iron ore, we raise our 2008 earnings estimate to $33.70 from $30.47 and 2009's projection to $37.50 from $35.88. Our target price remains $570 and assumes that BHP Billiton (BHP; 68.74) will ultimately succeed in its unsolicited stock swap bid to acquire RTP and is likely to again sweeten the offer. -L. Larkin

S&P REITERATES HOLD OPINION ON SHARES OF CORINTHIAN COLLEGES (COCO; 15.35):

June-quarter EPS from continuing operations is $0.11, vs. loss of $0.02, ahead of our $0.08 EPS estimate. COCO benefited from a 12% rise in new student starts and lower operating expenses. Bad debt expense rose, but this was expected amid the ongoing student loan crisis impacting the financial markets. COCO guides to fiscal year 2009 (June) student start growth of 7%-9%, revenue growth of 13%-17% and EPS of $0.58-$0.63. We are raising our fiscal year 2009 EPS projection by $0.05 to $0.60 and our 12-month target price to $18 from $16, 30 times that estimate, in the middle of COCO's historical p-e range. -J. Corridore


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