JP Morgan Downgrades Longs Drug to Neutral
JP Morgan downgraded Longs Drug Stores (LDG ) to neutral from overweight.
On Friday, the company posted 1.7% higher September same-store sales. Analyst Stephen Chick says he's moving to the sidelines. He says, while there are clearly some long-term opportunities for Longs, a turnaround will take some time, so investors need to have patience.
Chick notes Longs' first remodel program has not yet shown up in same-store sales trends, and that it's facing uphill comparable-store sales in the second half as it begins to cycle last year's Southern California grocery strike, as well as the voluntary separation program of store managers.
Valuation-wise, he notes the stock has appreciated 28% since May 18. He sees $1.00 fiscal 2005 (Jan.) earnings per share and $1.10 in fiscal 2006.
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