Avondale Cuts CSS to Market Perform

Analyst Denise Warren cites the company's earnings per share growth outlook

Avondale cut its investment opinion on CSS Industries (CSS ) to market perform from outperform on Monday, citing the company's earnings per share growth outlook.

Analyst Denise Warren said the company cut its 20% to 25% fiscal year 2006 (ending March) earnings per share growth forecast to between 13% and 18%. She noted that it cited 1) a product mix shift from higher margin to lower margin items and 2) production cost increases amid rising fuel costs at peak shipping time. She cut her $3.00 fiscal year 2006 earnings per share estimate to $2.75, and her $3.16 fiscal year 2007 estimate to $2.85. Warren believes there could be continued earnings risk should Wal-Mart Stores (WMT ), a 26% customer, not produce acceptable earnings per share performance. She believes Wal-Mart would ask its vendors to shoulder some of the burden of its lost business. She cut her $43 price target to $38.

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