Analyst Actions: Comcast, Collective Brands, Adolor
GOLDMAN DOWNGRADES COMCAST TO NEUTRAL FROM BUY
Goldman Sachs analyst Anthony Noto says his "extreme downside scenario" for Comcast (CMCSA) is playing out worse than he thought. He notes that Comcast cut guidance due to tougher macro conditions, continued competition. He says long term returns will also be clouded by risk of capex for new products or upgrade of network.
Noto sees limited upside to his discounted cash flow-based target with low conviction in his estimates. He also notes eroding returns with higher capital related to fewer revenue generating units (RGUs) net adds, risk of further capex investment, deteriorating fundamental trends as the fourth quarter will be weaker than the third quarter.
He cuts $0.74 2007 EPS estimate to $0.70, $1.06 2008 to $0.97, $1.31 2009 to $1.16. He cuts $25 yearend 2008 target to $22.
CARIS UPGRADES COLLECTIVE BRANDS TO ABOVE-AVERAGE
Caris analyst Claire Gallacher says her upgrade of Collective Brands (PSS) is based on a solid third quarter and better visibility into the fourth quarter. She says the shares have traded down significantly, and in the past 6 months, she believes the stage is now set for PSS to demonstrate power of Stride Rite acquisition in 2008.
She notes $0.39 third quarter EPS (excluding charges from purchase accounting, one-time tax benefit of $0.12), vs. her expectation of $0.36. She says the upside was derived from better cost controls, leading to operating margins of 6.8% vs. her 5.9% estimate.
She recommends purchase of the shares given the company's diversification of brands and distribution channels and associated margin opportunities even in difficult consumer environment. She sees $1.49 calendar year 2007 EPS, and $1.83 for calendar year 2008. She ups $18 target to $22.
PACIFIC GROWTH UPGRADES ADOLOR TO BUY FROM NEUTRAL
Pacific Growth analyst Gregory Wade says Adolor's (ADLR) agreement with Pfizer (PFE) for ADL5859, ADL5747 compounds provides that ADLR receive upfront non-refundable $30 million payment, plus $1.9 million for Phase 2 costs, and the company may also get up to $232.5 million in milestones. He notes more than 50% of the milestones can be earned prior to regulatory approval of the compounds, with first milestone at start of Phase 2b clinical study.
Wade believes Pfizer has seen sufficient merit in pre-clinical Phase 1 data to conclude this program (Delta) holds significant promise. He thinks panel review of Entereg Feb. 10 is the next catalyst for ADLR. He says the company estimated to have cash of $3.65 a share by yearend 2007.