Analyst Actions: Textron, Red Hat, Zoran
Citigroup cuts price target
Textron (TXT) cut its fourth quarter adjusted EPS from continuing operations estimate. Citigroup analyst Jeffrey Sprague says the new fourth-quarter operating guidance is well below plan; Industrial results drove about $0.25 of the miss. He notes the company's finance unit plans to exit non-captive finance operations; the company plans to retain its captive finance operations, engaging mainly in aircraft finance.
The analyst cut his $3.50 2008 EPS estimate to $3.05 and his $2.60 estimate for 2009 to $2.00. He cut his $31 target to $24. Sprague says the stock is likely to remain under a cloud, given EPS uncertainty, but the company has valuable assets and could become a takeover target as the finance unit diminishes in size. He keept his hold rating, but moved his risk rating to high from medium.
RED HAT INC.
Piper Jaffray ups estimates, reiterates buy
Red Hat (RHT) reported $0.12 third-quarter GAAP EPS. Piper Jaffray analyst Mark Murphy says third quarter revenue was essentially in line, and pro forma (PF) EPS well ahead of consensus. Murphy notes total PF revenue of $165.3 million (+22% year-over-year) or $172.2 million at constant currency (+27%) vs consensus of $166.4 million, while PF EPS of $0.24 exceeded the $0.18 consensus estimate. He says PF EPS benefited $0.02 due to repurchase of convertible bonds and $0.01 due to share repurchases. Murphy says Red hat sees fourth quarter total revenue of $166 million-$167.5 million, $0.19-0.20 PF EPS vs. consensus estimates of $171.6 million and $0.19. He raised his $0.49 fiscal 2009 (Feb.) PF EPS estimate to $0.58, and his $0.54 fiscal 2010 forecast to $0.59. He has a $22 12-month price target on Red hat shares.
Needham downgrades to buy from hold
Zoran Corp. (ZRAN) cut its fourth-quarter forecast. Needham analyst N. Quinn Bolton downgraded the shares after the negative pre-announcement, which Zoran tied to major order cancellations and delays across all of its product lines due to deteriorating economic environment. While he has hesitated to downgrade shares across his coverage universe as he thinks the fourth quarter of 2008 and the first quarter of 2009 will likely represent the trough of the current downturn, Bolton expects Zoran to lose money well into 2010, even assuming a 10% cut in non-GAAP operating expenses starting in the 2009 first quarter. He cut his $0.15 2008 EPS estimate to $0.02 and widened his $0.20 2009 loss per share estimate to a $0.60 loss.