Solectron (SLR ) posted third-quarter earnings per share of 1 cent (pro forma). Credit Suisse First Boston raised its rating on the shares to neutral from underperform.
Analyst Michael Walker says Solectron's third quarter was solid, and its fourth-quarter guidance strong, but light on revenues. He says Solectron sounded a better tone on end demand than rival Jabil, but declining quarter-over-quarter revenue growth and an anemic outlook speaks to an environment that is only gradually improving. Also, he continues to doubt the company's ability to grow gross margins back to 8%+ levels, particularly in light of recent divestitures. Walker says although Solectron appears to have righted the ship, its valuation lags its peer group. Given weak revenue guidance, and still-high market-implied expectations, he would not yet become aggressive on the stock. He tweaked his price target to $6.