BEAR STEARNS CUTS ESTIMATES FOR ALCOA
Bear Stearns analyst Anthony Rizzuto says Alcoa's (AA) $0.64 third quarter EPS compares to $0.65 Street view, $0.81 in the second quarter of 2007, and $0.62 in the third quarter of 2006. He notes portfolio transformation, currency, higher energy costs, softening markets, some of which will likely continue into coming quarters.
Rizzuto cuts $3.00 2007 EPS view to $2.80, $3.65 2008 to $3.30. He says his 2008 estimate incorporates planned sale of assets and slower-than-anticipated improvements at the Russian fabricating facilities. He thinks the key takeaway was increase in buyback program to 25% from 10%, which should offset some of the more near term headwinds.
He sets a yearend 2008 target price of $52. And he reiterates outperform opinion on the stock.
WEDBUSH MORGAN CUTS ARCH CHEMICALS TO NEUTRAL FROM STRONG BUY
Wedbush Morgan analyst Al Kaschalk says the downgrade of Arch Chemicals (ARJ) is based on four factors, including expected weaker third quarter of 2007 HTH Water Product segment results due to unfavorable weather and a slightly longer ramp to achieve the company's targeted long-term sustainable operating margin of 15%-17%. He also cites a neutral risk/reward equation after the stock's 27% appreciation since his Aug. 1 upgrade, and the likely elimination of any M&A premium that may have recently been imbedded in Arch Chemical's share price.
Kaschalk cuts his 2007 EPS estimate to $2.26 from $2.34. However, he ups $2.51 2008 EPS to $2.68 on increased expectations for Personal Care & Industrial Biocides. He sees $3.10 EPS in 2009. And he boosts $46 target price to $48.
STIFEL NICOLAUS DOWNGRADES CAPELLA EDUCATION TO HOLD FROM BUY ON VALUATION
Stifel Nicolaus analyst Jerry Herman says Capella Education (CPLA) shares (pre-open) trade at almost 47 times his forward 12-month EPS estimate of $1.35, and almost 41 times his $1.55 2008 estimate. He notes that while his estimates could prove conservative and the long-term growth prospects for the company remain very strong, he believes the current valuation adequately reflects the positive fundamentals, long-term growth prospects and acknowledges that earnings expectations are likely conservative.
Herman says even if estimates are 20% too low, he estimates the resulting multiples would be 39 and 34, respectively, which compares to company's 3-5 year operating income growth target of 25%-30%.