Analyst Actions: Lehman Brothers, Nxstage Medical, Western Refining, Kenexa
OPPENHEIMER CUTS ESTIMATES FOR BROKERS
Oppenheimer analyst Meredith Whitney says above the radar screen last quarter were sizable write downs, while below the radar were write ups resulting from spread widening on firms' debt due to credit spreads widening in the first quarter. Based upon action in CDS spreads so far this quarter, she believes brokers' earnings will face sizable headwinds from reversal of revenues resulting from the spread narrowing of firms' CDS spreads.
Whitney cuts EPS estimates for Lehman Brothers (LEH), Merrill Lynch (MER), Goldman Sachs (GS) and Morgan Stanley (MS), citing sizable estimated revenue reversals from FASB-159.
She believes valuation multiples, at best, will remain at current levels but are more likely to deteriorate further as she believes outlook for group is far more bleak than reflected in the market.
WILLIAM BLAIR CUTS NXSTAGE MEDICAL TO MARKET PERFORM FROM OUTPERFORM
William Blair analyst Ben Andrew says his investment thesis for Nxstage Medical (NXTM) for the next 6-12 months has shifted from one driven by significant growth in the company's daily chronic and home hemodialysis franchise to one more balanced by growth in all three of its businesses. He believes it appropriate to fully reevaluate his position.
Andrew notes $31 million first quarter revenue exceeded his target by $1 million, however, chronic care sales came in at $10.5 million, $800,000 below his estimate, with net patient adds of 258, 77 below his estimate.
He adjusts his model to reflect management's guidance and his belief that business model will develop slower than originally expected. He sees $1.38 2008 loss and $0.87 2009 loss.
CARIS DOWNGRADES WESTERN REFINING TO SELL FROM AVERAGE
Caris analyst Ann Kohler says Western Refining's (WNR) solid performance from retail and wholesale businesses was overwhelmed by skyrocketing operations costs at both Four Corners and Yorktown refinery, poor margin capture due to systems reliance of sweet crude, and high production of gasoline.
More importantly, noticeably absent from its earnings release was management plan to address the company's impending breech of its debt covenant. In a 10-Q filing, Western Refining said if margins continue to deteriorate, it may be unable to comply with financial covenants. Kohler thinks this inability will heighten investor concern pertaining to the company's ability to continue as a going concern.
As such, she downgrades the stock to sell and slashes her 9 price target to 2.75.
NEEDHAM UPS ESTIMATES FOR KENEXA
Needham analyst Richard Davis says Kenexa's (KNXA) first quarter results were good given an economic deceleration that's brought multiple compression and accelerated consolidation to human resource management system industry.
Davis raises $1.40 2008 EPS estimate to $1.50, and $1.75 for 2009 to $1.85. He notes the company was the first to seize on stagnation of once-great PSFT; it attacked this market with a busines model that delivered consistent growth.
He also notes he was the first to highlight the eventual integration effort from a well-executed acquisition binge. He doubts this effort will be very traumatic to margins, but until he gets a bit more clarity on how KNXA plans to grow, he maintains hold.