Analyst Picks and Pans: ADM, EAT, BYI, EV

What Wall Street analysts are saying about selected stocks in the news Tuesday

Archer-Daniels-Midland (ADM)

Citigroup downgrades to sell from hold

Citigroup analyst David Driscoll said on Apr. 7 that a recent visit with ADM management in Decatur, Ill., confirmed his belief that fundamental trends are deteriorating across ADM's major businesses, namely oilseed processing and agricultural services. Driscoll believes these weakening trends have yet to manifest themselves but will on ADM's third-quarter earnings report.

The analyst believes EPS for the quarter will come in below analysts' consensus estimate of $0.52 (he forecasts $0.46) and will likely prompt a lower fiscal 2010 (ending June) consensus estimate, currently at $2.87, which he believes is too high. Driscoll kept his $25 price target on the stock.

Brinker International (EAT)

Wachovia upgrades to outperform from market perform

Wachovia analyst Jeff Omohundro said on Apr. 7 that Brinker pre-released much stronger-than-expected third-quarter EPS (the company sees $0.44-$0.45, excluding items), driven primarily by cost improvements. Omohundro said he's particularly encouraged by management's commentary that positive momentum with regard to managing costs is expected to continue into fiscal 2010, and thinks Brinker could potentially achieve even greater leverage from these cost-control efforts once sales stabilize.

Omohundro increased his $0.28 third-quarter EPS estimate to $0.44, his $1.13 fiscal 2009 (ending June) view to $1.36, and his $1.23 fiscal 2010 projection to $1.62. He also boosted his $13-$15 valuation range to $21-$24.

Bally Technologies Inc. (BYI)

Roth Capital Partners reaffirms buy

Bally Technologies should be able to stay above the upheaval caused by the recession due to its solid balance sheet and strong product offering, Roth Capital Partners analyst Todd Eilers said on Apr. 7. Eilers said in a client note that the slot machine maker should benefit from a recent spate of good industry news, including strong regional gaming revenue results for the past three months and better-than-expected March Macau gaming revenue results.

Eilers reaffirmed his $50 price target for the Las Vegas-based company.

Eaton Vance (EV)

Stifel Nicolaus downgrades to hold from buy

Stifel analyst J. Jeffrey Hopson said on Apr. 7 that after a strong rally in the market, and in shares of asset managers, he downgraded Eaton Vance as he can no longer justify a buy rating at the current valuation. He noted that before the start of trading on Apr. 7, the shares were up 16% in 2009, better than the performance of the S&P 500 index, and had climbed above his above his $20 target. He noted that the shares were trading at 23.3 times forward EPS vs. 13.7 times for its peers; the shares were also trading at an enterprise value/EBITDA of 16.5 times, a premium of 60% to the peer ratio of 10.5 times.

Hopson believes the current extreme valuation premium leaves little room for error, and thinks the asset managers group is a bit ahead of itself at this point.

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