Analyst Picks and Pans: DIS, PVH, SGMS, NILE

Walt Disney Co. (DIS)

Goldman Sachs downgrades to neutral from buy

Disney is still the most "fundamentally" well positioned of the large media companies, Goldman analyst Mark Wienkes told clients in a Mar. 24 note.

But he added that fiscal second-quarter results are likely to miss Wall Street projections because of "tepid" theater revenue. Wienkes said theme park performance should prove a drag on the company through next year, but investors have already priced that factor into the stock.

He also said Disney trades at a 25% premium to peer companies -- CBS Corp. (CBS), News Corp. (NWS), Time Warner Inc. (TWX) and Viacom Inc. (VIAB) -- a gap he expects will narrow as short-term results come in below expectations.

Wienkes also cut his price target to $20 from $26.

Phillips-Van Heusen Corp. (PVH)

Citi Investment Research upgrades to buy from hold

Citi Investment Research analyst Kate McShane wrote in a Mar. 24 note that the company's $0.30 fourth-quarter earnings per share were at the high end of its guidance. McShane thinks management could report closer to the high end of its fiscal 2010 (Jan.) guidance range of $2.00-$2.30 per share as the company controls costs and benefits from restructuring savings. She believes Phillips-Van Heusen is managing well through the current economic environment, with clean inventory management, moderated expansion plans, and a robust balance sheet.

THe analyst lowered her fiscal 2010 earnings view to $2.25 per share from $2.32 per share on continuing difficult revenue and margin trends; she also cut her fiscal 2011 forecast to $2.57 per share from $2.70 per share. But she raised her price target to $24 from $19 on improved multiple views.

Scientific Games (SGMS)

JPMorgan cuts estimates

Scientific Games Corp. will likely have a bigger revenue decline this year than initially expected, a JPMorgan analyst said Tuesday as he cut some of the casino equipment maker's earnings estimates. Carlo Santarelli said in a Mar. 24 note that the New York-based company's results will be weighed down by a stronger dollar as well as softness in some of its U.S. markets and the British pubs.

Santarelli anticipates a slower ramp up of the company's own cost control measures, and predicts such efforts will be unlikely to give a boost to business until later this year.

"We think Scientific Games is a second half of 2009 execution story and as such, we remain on the sidelines at present," the analyst wrote.

Santarelli maintained a neutral rating and $11 price target. He slashed his first-quarter profit forecast in half, to $0.10 per share. The analyst also lowered his full-year estimate to $0.80 per share from $0.94 per share and cut his 2010 forecast to $1.08 per share from $1.13 per share.

Blue Nile Inc. (NILE)

Citi Investment Research raises price target

Citi Investment Research analyst Mark S. Mahaney said online jewelry sales are improving as other jewelers are exiting the market because of bankruptcies. Mahaney said traffic to Blue Nile's online site declined 25% in February compared with a year ago, but that was a slight improvement from a 34% drop in January.

Mahaney said Blue Nile is benefiting from several bankruptcies in the U.S. jewelry industry, including Whitehall Jewellers Inc., Friedman's Inc., Shane Co., Fortunoff and Christian Bernard.

"We believe that roughly 5% of industry capacity has exited the market and is unlikely re-enter any time soon," Mahaney said in a Mar. 24 note.

Mahaney said that Blue Nile is in a beneficial position as an online retailer because it does not have inventory and operating costs that come with a brick and mortar location.

Mahaney also said that diamond prices are declining, which benefits Blue Nile because the company doesn't have inventory and can be more flexible with prices when compared to other jewelers that have high fixed costs.

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