Analyst Actions: Barclays, Western Digital, Town Sports
MERRILL KEEPS BUY ON BARCLAYS PLC
Barclays (BCS) shares fell Friday on rumors of liquidity and earnings trouble. Merrill Lynch analyst John-Paul Crutchley says at the risk of tempting fate, both stories look like a Friday bear raid in a skittish market. On funding worries, he notes that Barclays' Tier 1 ratio is sound, and it is in middle of a buyback program (BCS bought back 5.75 million shares on Nov. 1; he doesn't think this would have happened if the company was in talks with the Bank of England over liquidity support).
He adds that the Bank of England confirmed this morning that it has not been approached by any bank for emergency funding. And while BCS is out on the road meeting investors, he understands the message is consistent with previous view for 15%-20% target growth rate in Barclays Capital, operating trends elsewhere in business. He says EPS estimates and his 800p (US$64) target remain unchanged.
CARIS UPGRADES WESTERN DIGITAL TO BUY FROM ABOVE AVERAGE
Caris analyst Shebly Syrafi says the upgrade reflects Western Digital's (WDC) strong first quarter results and guidance, an improved industry structure with both Samsung and Hitachi behaving much more rationally, and very strong growth and potential in WDC's mobile drive business.
The analyst notes first quarter was strong, and second quarter guidance was higher than his estimates. WDC guided for second quarter revenue to be $1.875-$1.925 billion, gross margin of 18.5%-19%, opex of $163 million, and EPS of $0.73-$0.77 (w/o ESO).
Syrafi raises fiscal year 2008 (June) non-GAAP EPS estimate to $1.93, fiscal year 2009 to $2.83, fiscal year 2010 to $2.91, from $1.74, $2.24, $2.61, respectively. The analyst raises target to $35 from $27 (12 times $2.93 calendar year 2009 EPS estimate).
RBC CAPITAL CUTS TOWN SPORTS INTERNATIONAL HOLDINGS TO SECTOR PERFORM FROM OUTPERFORM
RBC analyst Edward Aaron says Town Sports International's (CLUB) third quarter EPS fell $0.01 short of estimates, but the quarter was fairly consistent with outlook provided on its second quarter call. He notes comps, guidance revision, commentary on the call are what concerned him. He says comps slowed to 4.1% from 5.7% in the second quarter, prompting the company to lower sales and EPS guidance for 2007.
He notes management acknowledged some softness in mature clubs and modest uptick in attrition. Given this slowdown, He has reason to be concerned that membership acquisition season, which begins in January, could be worse than last year's.
Aaron cuts $0.80 2007 EPS estimate to $0.75, $1.02 for 2008 to $0.73. He suspects his 2008 estimate revision will be deeper than the Street's.