Analyst Actions: Nike, Rent-A-Center, Guess

Analyst Actions: Nike, Rent-A-Center, Guess


Caris analyst Claire Gallacher says Nike's (NKE) third quarter EPS ($0.92) is well ahead of her $0.79 estimate. She notes a $0.04 gain from the sale of Starter brand and shift in demand creation spending bolstered EPS. She trims $0.96 fourth quarter EPS estimate to $0.94 to reflect increased demand creation spending that will fall into the quarter.

Gallacher notes with $3 billion in cash, Nike is committed to increasing shareholder value; investments in successful product categories, acquisitions, dividend with growth faster than annual EPS, accelerated share buyback are four avenues to return value to shareholders. She says Nike is navigating the current global economy better than competitors.

She sees $3.70 fiscal year 2008 (May) EPS, and $3.89 for fiscal year 2009. She has a 65 price target on the shares.


Stifel Nicolaus analyst John Baugh says Rent-A-Center's (RCII) valuation (prior to today's opening) is "just too low" at 7.6 times forecasted 2008 EPS of $2.23 and a free cash flow yield of 16.9%. He says with RCII's business stabilized, he's reasonably confident these estimates can be achieved.

Baugh notes RCII has been plagued by numerous legal settlements in recent years. And while it will pay out an additional $21 million in cash settlements in 2008 for cases that were settled previously, the "pipeline" of legal challenges is the cleanest he's seen in years; this means the "free cash flow" may actually go almost exclusively to shareholders and not to legal settlements.

He maintains $2.23 2008 EPS and $2.40 2009 estimates; and 24 price target.


Janney Montgomery analyst Holly Guthrie says Guess' (GES) fourth quarter EPS ($0.59) is ahead of her $0.56 and the Street's $0.57 views. She says comps in North American retail stores increased 13%, while wholesale sales (including operations in Asia) rose 53%.

Guthrie notes that gross and operating margins were both up 70 basis points, as increased mix from Europe and higher gross margins it brings with it aided total revenue growth. She says the company's domestic business slowed, but because GES is so internationally diverse, solid EPS growth should continue.

As one of best-run companies in the retail space, she thinks GES is trading at a deep discount to its growth rate and would encourage investors to look at GES on any weakness. She thinks the stock is fairly valued at $62, or approximately 25.7 times her $2.41 fiscal year 2009 (January) EPS estimate.

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