S&P Cuts AllianceBernstein, Ups Pinnacle Airlines

Analyst Jim Corridore notes risks such as the company's Northwest Airlines problem. Plus: analysts upgrade Cytec Industries, comment on Leap Wireless' secondary offering, and more

From Standard & Poor's Equity Research

AllianceBernstein (AB) : Cuts to 3 STARS (hold) from 4 STARS (buy)

Analyst: Jason Willey

We are downgrading shares of AllianceBernstein on valuation. Although we continue to view positively the company's international product offering and diversified client base, we see shares as fairly valued having risen 15% since the firm's June quarter release. We believe the recent share appreciation has erased much of the valuation disparity between AllianceBernstein and its peers. Our 12-month target price remains $73.

LA-Z Boy (LZB) : Cuts to 2 STARS (sell) from 3 STARS (hold)

Analyst: William Mack, CFA

July quarter operating EPS of 2 cents vs. 5 cents is a penny below our forecast as narrow improvement in gross margin, tied to consolidation of an earlier equity investment, was more than offset by higher overhead. With our view of near-term consumer demand at each of LA-Z Boy's units peaking at mostly tepid levels, and based on our view that secular demand is even softer than that, we now think LA-Z Boy is overvalued. Our 12-month target price, cut today to $12 from $14, implies enterprise value reverts to past levels.

DENTSPLY International (XRAY) : Cuts to 3 STARS (hold) from 5 STARS (strong buy)

Analyst: Richard Tortoriello

With recent price appreciation, the shares are nearing our $36 12-month target price. We continue to believe the outlook for the company and for the dental market, in general, is strong, with favorable demographics in the U.S. and Europe and increasing wealth in emerging markets. We are especially impressed by DENTSPLY's continued new products flow. Also, we believe the company's depth of management should allow a smooth transition as current CEO Gary Kunkle retires in January.

Pinnacle Airlines (PNCL) : Ups to 2 STARS (sell) from 1 STAR (strong sell)

Analyst: Jim Corridore

We are raising our 2007 earnings per share (EPS) estimate to $1.50 from $1.00, reflecting Pinnacle Airlines's ability so far to keep its operating margin stable, and we are raising our target price to $6 from $4. Our new target price values the shares at 4 times our 2007 EPS estimate, still well below peers. We still regard Pinnacle Airlines's outlook as uncertain. It is yet to start negotiating a new contract with Northwest Airlines. A variety of alternatives, from loss of all Northwest flying to affirmation of the current level, are possible. Given this uncertainty, we find risks too high despite the large discount to peers.

Cytec Industries (CYT) : Ups to 4 STARS (buy) from 3 STARS (hold)

Analyst: Richard O'Reilly, CFA

Cytec Industries's share price is down 18% from its late-April high. We still see 2006 EPS of $3.55, up from 2005's $3.07, and expect $4.10 in 2007. We think problems at Airbus will result in only modest delays in Cytec Industries's sales of composite materials, since it has a only small share for the A380. We think growth otherwise for composites continues to be robust, driven by greater use by aircraft makers. Cytec Industries's coating chemicals business continues to perform well, and the company is restructuring and divesting two underperforming specialty chemical product lines. Our 12-month target price remains $64.

Leap Wireless (LEAP) : Maintains 2 STARS (sell)

Analyst: Todd Rosenbluth

Leap Wireless prices 5.6 million shares at $42 in a secondary offering intended to raise funds to support its wireless license auction participation. As a result of the expected higher share count, we are lowering our 2007 EPS estimate by 4 cents to 36 cents. While Leap Wireless reported stronger-than-expected second quarter results in early August, we are concerned that its growth is dependent on new market launches that incur high upfront costs. Our 12-month target price remains $42.

Before it's here, it's on the Bloomberg Terminal.