Analyst Actions: Palm, CIT Group, Monsanto, Big Lots
RBC CAPITAL CUTS ESTIMATES, TARGET FOR PALM
RBC Capital analyst Mike Abramsky says Palm's (PALM) third quarter revenue missed estimates. He notes Centro uptake couldn't offset declining Treo shipments. He says with limited visibility to the company's pending product plans, he believes investors may have to wait 2-3 quarters before seeing if new products can reverse revenue and margin declines. W
Abramsky widens his $0.22 fiscal year 2008 (May) loss estimate to $0.31 loss, $0.09 fiscal year 2009 loss to $0.25 loss.
Although the stock trades at 0.6 times enterprise value to sales ($127 million net debt), below peers at 2.1 times, it remains a show me story and needs to prove it can deliver competitive offerings against Research in Motion (RIMM) and Apple (AAPL), all while continuing to face deep challenges. He cuts his price target to 5 from 6, and keeps sector perform rating.
STIFEL NICOLAUS UPGRADES CIT GROUP TO BUY FROM HOLD
Stifel Nicolaus analyst Chris Brendler says although last week's decision by CIT Group (CIT) to tap commercial paper backup lines will put further pressure on its ability to fund itself, he views the move favorably as it should buy CIT time to seek alternatives.
While management pointed to asset sales as potential funding strategy, he thinks the company is much more likely to seek strategic partner, most likely in an acquisition. Since he sees CIT's problems as mostly capital markets related, Brendler sees CIT as an attractive acquisition candidate. He thinks an ideal acquirer will have a strong balance sheet, therefore could double-dip: buy assets at distressed price and reap margin benefits from the ensuing drop in CIT's funding costs.
He has a 20 target price on the stock.
UBS FINANCIAL UPGRADES MONSANTO TO LONG-TERM BUY FROM NEUTRAL
UBS analyst Chris Shaw says he's raising his long-term rating on Monsanto (MON) to buy from neutral and removing his short-term sell rating. He says with Monsanto recently down about 25% from highs reached earlier this year, the market has been pricing in the "appropriate amount" of near-term risk for potential weakness in seeds due to acreage shifts away from corn.
However, Shaw views the near-term downside as limited. He notes he previously highlighted the long-term opportunity in Monsanto's seed business, given the company's robust research and development pipeline, and at recent levels, he does not believe the stock fully reflects this.
He ups $2.75 2008 EPS estimate to $2.80. He maintains a 125 price target.
WEDBUSH MORGAN UPGRADES BIG LOTS TO STRONG BUY FROM BUY
Wedbush Morgan analyst Joan Storms says her confidence has increased regarding Big Lots' (BIG) longer-term earnings power and positive visibility on sales, general and administrative (SG&A) initiatives. She says she visited clients last week with BIG senior management, and feels the Street continues to underestimate the efficiencies management can extract from the business.
Storms notes that BIG continues to develop new vendor relationships. And aside from current SG&A initiatives, including transportation (both inbound and outbound), BIG will be implementing new SAP merchandising software, which should deliver solid benefits in 2009 and 2010.
She maintains $1.78 fiscal year 2009 (January) EPS, $2.10 fiscal year 2010 estimates; and ups 26 price target to 28.