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Stock Picks: J. Crew, PNC Financial, Potash Corp.

Wall Street analysts offer buy, sell, or hold opinions on stocks in the news Aug. 27

J. Crew Group: Needham & Co. equity analyst Christine Chen reiterated a hold rating on shares of J.Crew Group (JCG) on Aug. 27. On Aug. 26, shares of the apparel purveyor sank in after-hours trading after the company said profit for the fiscal year ending January 2011 will be $2.25 to $2.35 a share. That compared with a forecast in May of as much as $2.45. The retailer expects third-quarter earnings of as much as 60¢ a share, which falls short of analysts' projections. Sales at stores open at least a year will be flat in the quarter. Net income in the second quarter ended July 31 rose to $34.9 million, or 53¢ a share, from $18.6 million, or 29¢, a year earlier. J. Crew is the latest U.S. retailer to say it's unsure about the rest of the year. Last month, store sales missed analysts' estimates as consumers restricted spending ahead of the back-to-school season. Consumer confidence also slumped in July, according to a University of Michigan survey. In a note, Chen said she believes in the strength of the J. Crew brand and thinks the company's fall apparel collection is "trend-right," despite getting an inconsistent start to the season largely due to what she thinks are macroeconomic concerns and increased markdowns at competitors. As the company's third-quarter earnings per share (EPS) guidance missed her former estimate of 74¢, she now sees EPS of 63¢ for the quarter; she cut her EPS estimates for fiscal 2011 to $2.36 from $2.54 and for fiscal 2012 to $2.54 from $2.84. Chen said she views the stock's valuation as "fair" at current levels. PNC Financial Services Group: Janney Montgomery Scott equity analyst Rick Weiss reiterated a buy rating on shares of PNC Financial Services Group (PNC), the fifth-largest U.S. bank by deposits, on Aug. 27. He lowered a fair value estimate on the shares to $70 from $75. Weiss said in a note that a 15 percent decline in PNC's stock price since the company reporting second-quarter earnings on July 22 "affords investors with a compelling buying opportunity." He said PNC's second-quarter results were "good," suggesting that the bank's long-term earnings potential "will be even better" when the economy improves. The analyst said he attributes the recent stock price retreat mainly to macroeconomic and industry concerns. Potash Corp. of Saskatchewan: Soleil Securities maintained a hold rating and a $160 price target on shares of Potash Corp. of Saskatchewan (POT) on Aug. 27. Growing use of fertilizer to boost crop yields has turned Potash, which controls 20 percent of the world's supply of its namesake fertilizer component, into Canada's fifth-largest company by market capitalization. That demand also spurred BHP Billiton (BHP), the world's biggest mining company, to make a $40 billion hostile bid for Potash last week. Potash Corp. Chief Executive Bill Doyle rejected last week's $130-a-share bid from BHP. In a note, equity analyst Mark Gulley said that during an Aug. 26 conference call held by BHP to review its fiscal 2010 fourth-quarter results, all the questions from analysts were focused on the company's hostile bid for Potash. Gulley said that acquiring Potash gives BHP the option to "massively deploy capital" in the company's low-cost Saskatchewan potash deposit to gain market share aggressively, "presumably at the expense of high-cost producers, over time." The analyst said that while BHP evaluated the other major Saskatchewan potash producers—Mosaic (MOS) and Agrium (AGU), its primary focus is clearly on Potash.

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