Analyst Actions: Cooper, Akamai, Microchip Technology
GOLDMAN DOWNGRADES COOPER COMPANIES TO NEUTRAL FROM BUY
Goldman Sachs analyst Lawrence Keusch says Cooper Companies' (COO) fiscal year 2008 (October) EPS guidance is significantly below his forecast. He thinks management's decision to step up reinvestment is a decisive shift in priorities away from significant operating leverage and cash flow generation. He also questions whether its business model includes higher promotional and marketing expenses as the company goes up against Johnson & Johnson (JNJ).
Keusch thinks there is discrepancy between operating margin and EPS guidance; management set EPS guidance to be "beat," which could limit credibility. He sees negative leverage in foreseeable future and thinks investors will wait for earnings acceleration.
He cuts $2.72 fiscal year 2008 EPS to $2.37, $3.36 fiscal year 2009 to $2.86. He cuts $58 6-month target to $37.
COWEN DOWNGRADES AKAMAI TECHNOLOGIES TO NEUTRAL FROM OUTPERFORM
Analyst Tom Watts says AT&T's focus on content delivery network (CDN) signals faster commoditization of the CDN market. He says AT&T's (T) extensive network reach could shrink avg distance between CDN node and customer to as little as 100 miles vs. Akamai's(AKAM) 250+ miles; similar to Level 3 Communications (LVLT), and AT&T's network should give it cost advantage over Akamai.
Watts views AT&T as more credible threat than Level 3 due to its extensive customer relationships, network reach, execution capability.
He raises cash gross margin declines estimate for AKAM to 300 basis points from 250 basis points for 2009-2011. He cuts $1.67 2008 EPS estimate to $1.65, $2.03 for 2009 to $1.99. He also notes AKAM's recent stock price gains reduces potential outperformance.
STIFEL NICOLAUS KEEPS BUY ON MICROCHIP TECHNOLOGY
Stifel Nicolaus analyst Cody Acree says Microchip Technology (MCHP) closed its offering of $1.03 billion 2.125% convertible debts, and in conjunction with the closing, the company used $639 million of proceeds (which totaled $1.127 billion) to repurchase 21.5 million shares.
As a result of repurchases, MCHP said it expects $0.01 positive impact to December-quarter EPS, and includes $120 million overallotment, $0.046 to March quarter. Given the company's inclination to steadily increase its dividend as opposed to buy back shares, he views this especially large repurchase as a telling sign of the company's confidence in future prospects.
Acree ups $1.40 fiscal year 2008 (March) EPS estimate to $1.45, $1.58 for fiscal year 2009 to $1.70. He has a $42 price target on the stock.