Nike Inc. (NKE)

Citi Investment Research maintains buy

Late Mar. 18, Nike reported that its profit dropped in its fiscal third quarter due to an after-tax charge of $240.7 million to reflect the deteriorating value of its investment in the soccer brand Umbro PLC. The company also said that orders for products to be delivered through the spring and summer were 10% lower than in the same quarter last year. Excluding changes in currency, orders were down 2%.

On Mar. 19, Citi Investment Research analyst Kate McShane maintained a buy rating on the stock, and said any decline in the stock price on Thursday could offer investors a buying opportunity.

"Even though futures were weaker than expected Nike's major brands (Nike, Jordan, and Converse) continue to take market share at the expense of key competitors in the U.S. and Europe, which has offset weakness from the macro environment," McShane said. "As such, we expect Nike to be well positioned to emerge from current macro challenges as an even stronger player. The analyst noted that she was encouraged by Nike's momentum in the basketball segment, which reported a double-digit surge in orders.

Graco Inc. (GGG)

Baird cuts to underperform from neutral

R.W. Baird analyst Michael Schneider wrote on Mar. 19 that Graco said that organic orders have declined 40% year-to-date, far below his low double-digit organic decline in his first-quarter model, as capital spending globally has seized for systems used in industrial manufacturing process, pressuring the company's core. Schneider cuts his first-quarter EPS estimate by $0.26 to $0.05, and his full-year 2009 forecast by $0.57 to $0.89, and his price target to $16 from $20.

Schneider expects the stock to underperform the sector until greater clarity is gained regarding margin potential. Nevertheless, he said Graco remains an elite franchise, and he would consider turning aggressive on the stock at $10-$12.

Cintas Corp. (CTAS)

Citi Investment Research cuts profit estimates

The corporate uniform supplier said on Mar. 18 that its fiscal third-quarter profit fell 12% due to the slowing economy. On Mar. 19, Citi Investment Research analyst Ashwin Shirvaikar cut his 2009 earnings estimate for the Cincinnati company to $1.93 from $2.04 and reduced his estimate for next year to $1.97 from $2.19. Shirvaikar reiterated a hold rating on the shares.

In a note to investors, he said Cintas' uniform rental business "is likely to deteriorate due to the impact of macro-economic conditions." Specific risks to its share price include more job losses, the potential for fuel costs to rise significantly, Cintas' exposure to the beleaguered U.S. auto industry and the potential for the depreciation of Canadian currency relative to the dollar, Shirvaikar said.

However, Cintas's shares could exceed his target price, which he cut to $22 from $23, "if there is the perception of a bottoming and subsequent recovery in job growth" in the United States or if energy costs continue to decline, he said.

Shirvaikar said the revenue miss was drastic by Cintas' standards. He cited the impact of client layoffs and hiring freezes. "While this should persist, lower energy costs and impressive cost takeouts helped limit the earnings-per share miss," he said. "The environment will likely not improve in the near-term, but becoming leaner is a long-term plus for Cintas."

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