Eastman Kodak (EK)
Maintains 2 STARS (sell)
Analyst: Thomas Graves, CFA
Kodak says it hopes to complete its restructuring steps by the end of 2007, with total costs reaching $3.8 billion, compared to charges so far of $2.7 billion. Total job reductions may reach 30,000, up from EK's previous 27,000 estimate. The company also plans a new line of inkjet printers using lower-cost ink cartridges, which it hopes will support growth. We view Kodak's revenue growth and selling, general and administrative (SG&A) expense reduction plans as quite aggressive, and we are keeping our 2007 EPS estimate of 98 cents. We are also maintaining our 12-month target price of $24.
Reiterates 4 STARS (buy)
Analyst: Phillip Seligman
Fourth-quarter operating EPS of $1.16, vs. 86 cents one year earlier, beats our estimate by 13 cents. Sales were higher than we expected, with healthy gains in all three segments, with notably strong sales of glaucoma and anti-infection drugs, intraocular lenses, and contact lens disinfectants. We see Alcon benefiting from an improving product mix and operating efficiencies. A declining tax rate, aided by production shifts, also helps lift EPS, and we view this as good management execution. We are increasing our 2007 EPS estimate by 25 cents to $5.20, 2008's by 25 cents to $6.00. We are raising our target price by $6 to $144.
Downgrades to 3 STARS (hold) from 4 STARS (buy)
Analyst: Jason Asaeda
The downgrade is based on valuation. Saks shares have risen about 13% over the past month and are now trading near our 12-month target price of $21. In our view, the company is continuing to make headway in its efforts to re-establish Saks Fifth Avenue as a premier luxury retailer, as reflected in January's impressive 11.4% same-store sales gain. Ongoing strength reported in sales of women's and men's modern collections and women's designer assortments also reduces our concerns over execution risk in merchandising. We are reiterating our fiscal 2007 (ended January) EPS estimate of 21 cents and our fiscal 2008 estimate of 45 cents.