BB&T Capital Cut Nautilus to Hold

From Standard & Poor's Equity Research

BB&T Capital cut Nautilus (NLS) to hold from buy, explaining that the company's second quarter sales growth of 6.2% is below expectations due to a 13% decline in direct sales and flat retail orders.

Analyst Laura Richardson says that while the consumer environment has clearly weakened, poor direct sales make her nervous of other issues like channel cannibalization. She thinks tepid second quarter sales growth and third quarter guidance (of between 16 cents to 24 cents earnings per share (EPS) on $165 million to $180 million revenue) lessens her confidence. This leaves little room for error in a lousy consumer environment. She cut her 27 cents third quarter EPS estimate to 20 cents, her 85 cents 2006 estimate to 75 cents, and her $1.08 2007 estimate to 90 cents.

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