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Analyst Actions: IBM, Quest Software, Men's Wearhouse

From Standard & Poor's Equity ResearchGOLDMAN KEEPS BUY ON IBM

Goldman Sachs analyst David Bailey says IBM's (IBM) third quarter revenue was short of forecasts, but EPS was in line.

Bailey sees a downward bias for all hardware companies and doesn't believe any of his companies will make it through next 12-18 months unscathed. However, he thinks those with the most EPS resiliency and diversity will outperform; he recommends owning IBM and Hewlett-Packard (HPQ) because he expects them to see the least amount of EPS leakage, due to cost cutting, buybacks and other non-operational items.

For IBM, he sees $8.79 2008 EPS, but cuts $9.80 2009 estimate to $9.35. He cuts $140 price target to $110 on historical trough multiple of 12.5 times 2009 EPS. estimate.


Stifel analyst Todd Weller says he views Quest Software's (QSFT) news that it plans a meaningful share buyback program and named a new CEO with the current CEO becoming chairman as positive.

With respect to the share buyback, Weller notes this issue became a bit contentious after last quarter's conference call, where QSFT said it was weighing acquisitions vs. a share buyback. He thinks management indicating a potential tender of $13.25-$15.50 validates his view that QSFT shares below $15 are extremely cheap.

Regarding the CEO change, he believes it could improve QSFT's visibility on the Street. He has a $20 price target on the stock.


Wedbush analyst Betty Chen says softness in the tailored clothing business led Men's Wearhouse (MW) to cut its third quarter adjusted EPS guidance to $0.24-$0.28.

In turn, Chen cuts her below-consensus third quarter EPS estimate to $0.25 from $0.36 and fourth quarter's to $0.22 from $0.23, leading to a new fiscal year 2009 (January) estimate of $1.40, vs. $1.51 previously.

She says, with the cyclicality in the MW business and her belief for a prolonged macro-economic downturn that could continue to pressure near-term earnings, she's maintaining a hold rating on MW. To reflect lower EPS estimates, she cuts her $19 price target to $17.

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