Wachovia Cuts Robert Half to Underperform

Gives the company's capital expansion plans a thumbs down

Wachovia downgraded Robert Half International (RHI) to underperform from outperform.

Analyst Clinton Fendley says that during the past several years, an increase in the company's capital expansion has been followed in the subsequent year by disappointing share price performance. He noted management's increase in 2006 capex estimates and that its investments are meaningfully higher than in the past, among other things. He thinks earnings per share (EPS) growth will likely be negatively impacted during the next few quarters from planned expansion. He lowers his $1.53 2006 EPS estimate to $1.48 and his $1.70 2007 estimate to $1.68. He thinks the higher risk profile warrants lower valuation of 20 times to 21 times the new 2006 EPS estimate.

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