Analyst Actions: GE, Tenet Healthcare, Xyratex
DEUTSCHE BANK CUTS GENERAL ELECTRIC EARNINGS ESTIMATES, TARGET
Deutsche Bank analyst Nigel Coe says, following last week's preannouncement by General Electric (GE), he cut his 2008 EPS estimate by 9% to $2.00. He says the adjustment largely reflects the deterioration at GE Capital - driven by tighter credit markets, asset shrinkage and debt pay-down; also eases back on industrial assumption.
While there is further short-term downside potential to GE Capital estimates, he believes that the market is also focused on 2009. As such, he now expects further decline in 2009 EPS to $1.95.
Coe says valuation analysis indicates that GE shares are fairly valued on an absolute basis but expensive on a relative basis. He reiterates hold rating and lowers his price target to $26.
UBS DOWNGRADES TENET, COMMUNITY HEALTH, UNIVERSAL HEALTH
UBS analyst Justin Lake says he's taking a more cautious view of hospitals, as channel checks indicate July/August trends were uninspiring, with modest admittance growth (although 1 less weekday year-over-year) and bad debt flat to deteriorating modestly. He says given the impact of hurricanes and the relatively sudden departures of three senior executives (at Health Management Associates (HMA), Lifepoint Hospitals (LPNT) and HCA), he sees little potential for a strong quarter out of the hospital group.
Lake cuts Tenet Healthcare (THC) to sell from neutral; he also lowers Community Health (CYH) and Universal Health Services (UHS) to neutral from buy.
He expects economic weakness to eventually reveal itself in hospital results sometime during 2009, given the lagging correlation between macroeconomic trends and key fundamentals (admits/bad debt).
NEEDHAM CUTS XYRATEX TO BUY FROM STRONG BUY
Needham analyst Glenn Hanus says Xyratex (XRTX) posted $280.8 million third quarter revenue and $0.36 non-GAAP EPS, compared to his $286 million and $0.39 estimates. He says while the company generally is executing well, it faces challenges in both business segments.
He notes though MXO integration is done and Storage Infrastructure is resuming growth, the rate is slower than expected and rival Teradyne (TER) could receive some business from Western Digital (WDC). In Networked Storage Solution, he says XRTX remains well entrenched at NetApp (NTAP), but up to 25% of its NTAP business should eventually transition to a license model (for XRTX) as NTAP obtains a second supply source.
Hanus cuts $1.11 fiscal year 2008 (November) EPS estimate to $0.90, $2.03 for fiscal year 2009 to $1.29. He has a $14 price target.
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