JP Morgan Downgrades Longs Drug to Neutral

Analyst Stephen Chick is disappointed with the drug-store chain's September store sales

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.