Analyst Actions: Washington Mutual, Citrix Systems, IMS Health

Opinions from analysts around Wall Street on Thursday


After Washington Mutual (WM) reported third quarter results, Friedman downgraded the stock to underperform from market perform. Analyst Paul Miller says he now believes credit trends are eroding much faster in this weakening housing market than he previously anticipated, and will put significant pressure on all mortgage lenders' earnings.

Miller says WaMu's third quarter EPS were significantly impacted by higher loss provisioning, valuation adjustments across several asset classes. More importantly, he notes WaMu increased its guidance for loss provision by another $500 million, which will result in the company not earning its dividend for the second quarter in a row. He thinks this new provision guidance will result in the market looking for a dividend cut in the next few quarters.

Miller cuts $2.48 2007 EPS estimate to $2.35, $3.05 for 2008 to $2.00, and his $35 price target to $23.


Citrix Systems (CTXS) reported third quarter earnings that beat estimates, but its guidance disappoints the Street.

Needham analyst Scott Zeller says he's downgrading Citrix to hold from buy. He believes the stock has appreciated over the past several months based on improved year-over-year comparisons due to pricing increases, and optimism regarding the XenSource acquisition in the virtualization market. However, he thinks momentum from these drivers may have plateaued.

Zeller says that while third quarter results were solid, guidance for the fourth quarter and 2007 ($0.42-$0.43 non-EPS for Q4, $1.52-$1.53 for 2007) raise concerns of an operating margin slowdown as well as the ramp for Xen revenues and associated costs. He cuts non-GAAP $1.53 2007 EPS estimate to $1.52, and $1.76 for 2008 to $1.56.


Analyst Eric Coldwell says he downgrades IMS Health (RX) to underperform from outperform following disappointing near-term performance, challenges that are unlikely to abate in near term, and no visible catalysts. He says performance has turned on a dime since June; elongated selling cycles and pricing pressure are expanding globally.

Coldwell believes that the company in 2008 will struggle to deliver mid-single digit sales and EPS growth. He notes that the company's fixed cost infrastructure has a compounding impact on margin. He thinks management's planned shift to a more variable cost structure will take time, and he questions why this didn't happen sooner.

He cuts $1.58 2007 EPS estimate to $1.52, $1.74 for 2008 to $1.62. He lowers $37 target price to $24.

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