JP MORGAN DOWNGRADES INTEL TO NEUTRAL FROM OVERWEIGHT
JP Morgan analyst Christopher Danely says he's growing increasingly concerned on an inventory correction for PC components due to weakening demand and high channel inventory. He says his checks indicate Intel (INTC) experienced a late-quarter slowdown in order rates from the PC end market which negated the upside he believes the company experienced in the fourth quarter 2007.
Danely believes weakness in order rates could be coming from Europe (about 23% of overall PC demand in the third quarter).
He cuts EPS estimates of $1.24 for 2007 to $1.23, and $1.68 for 2008 to $1.66. Although the shares are trading below trough of their normal range and the valuation is attractive, he believes there is little upside and increasing risk to downside to consensus estimates.
MORGAN KEEGAN CUTS ESTIMATES FOR BED BATH & BEYOND
Morgan Keegan analyst Laura Champine says Bed Bath & Beyond's (BBBY) $0.52 third quarter EPS was in line with her estimate, thanks to a $0.03 one-time tax benefit, while fourth quarter EPS guidance of $0.64-$0.67 fell short of her expectations. She says the outlook probably indicates that consumer spending is slowing and that traffic decelerated during the holidays and Christmas, which could be a bad omen for fourth quarter financial results across the home products segment.
Champine cuts BBBY's $0.78 fourth quarter EPS estimate to $0.64, $2.20 fiscal year 2008 (February) to $2.08, $2.54 fiscal year 2009 to $2.26. With the shares down 28% in the past year, she reiterates her market perform rating based on valuation and a fairly neutral risk/reward scenario.
CREDIT SUISSE CUTS GLOBAL PAYMENTS TO UNDERPERFORM FROM NEUTRAL
Credit Suisse analyst Paul Bartolai says Global Payments' (GPN) $0.48 second quarter EPS $0.03 above consensus, with upside driven largely by favorable forex, one-time benefits (which the company would not quantify). He notes Merchant margins declined roughly 200 basis points excluding forex.
Bartolai says while GPN should see some modest margin benefit from cost savings, he thinks ongoing revenue mix shift and competitive pressures will cause further margin pressure in fiscal year 2009 (May). Due to the lack of operating leverage, his expectation for continued margin pressure, and potential for economic weakness, he downgrades the shares.
He raises fiscal year 2008 EPS estimate by $0.01 to $1.93, keeps $2.10 fiscal year 2009 EPS and $35 price target.
CARIS CUTS TARGET AND ESTIMATES FOR MICREL, KEEPS BELOW-AVERAGE RATING
Caris analyst Nicholas Aberle says while the consensus bar is likely to be reset after Micrel's (MCRL) negative fourth quarter preannouncement, he still sees near-term EPS risk with lower book-to-bill utilization. He thinks weakness in wireline infrastructure and wireless handset end-markets is the primary culprit of the fourth quarter shortfall.
Aberle believes Micrel visibility is among the worst in his semiconductor universe. He notes the company sees first quarter revenues flat quarter-to-quarter, but he sees revenues down 3% to be conservative, assuming communications weakness could linger into January and February.
He cuts $0.57 2008 EPS estimate to $0.50 and $9 price target to $7.50. He recommends investors steer clear of MCRL and rotate into his favored small-cap analog IC name, Microsemi (MSCC).