Analyst Picks and Pans: MS, BBBY, JNPR, KMX

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

Morgan Stanley (MS)

William Blair & Co. cuts estimates

William Blair & Co. analyst Mark Lane increased his estimate for write-downs Morgan Stanley will need to take on long-term debt to $500 million from $0. In an Apr. 8 research note, Lane noted that disclosure associated with the potential write-downs is unclear and thus the estimate is not certain. Aside from the increased write-downs, Lane also projects Morgan Stanley will need to take an additional $250 million in charges tied to commercial real estate exposure because of sharp deterioration in 2009 in the performance of securities backed by commercial real estate loans.

Because of the additional charges, Lane cut his first-quarter earnings estimate to 1 cent per share from 25 cents per share. He also slashed his 2009 earnings estimate to $1.78 per share from $2.25 per share and his 2010 earnings estimate to $3.30 per share from $3.75 per share.

Despite the reduced earnings estimates, Morgan Stanley's capital levels remain strong and the bank is unlikely to need additional capital, Lane wrote in the note. Lane rates Morgan Stanley as market perform.

Bed Bath & Beyond (BBBY)

JPMorgan upgrades to neutral from underweight

JPMorgan analyst Christopher Horvers said on Apr. 8 he was upgrading the stock as Bed Bath & Beyond's better than expected fourth-quarter earnings report proved aspects of his thesis incorrect. He noted that his original downgrade was predicated on the belief that benefits from the liquidation of former rival Linens 'N Things were being overestimated by Wall Street, the fragmentation of the industry meant the promotional environment would remain difficult, and inventories were heavy.

Horvers said it's tempting to wait for a pullback to upgrade the shares, but he sees no near-term catalyst for this to occur, outside of a pullback by the company's peer group. As such, he rates the stock neutral.

Juniper Networks (JNPR)

Broadpoint Amtech upgrades to buy from neutral

Broadpoint analyst Mark McKechnie noted on Apr. 8 that Juniper now sees $760 million-$765 million in first-quarter sales, vs. his $790 million estimate, but it preserved its earnings per share view at 16 cents-17 cents on aggressive operating expense control. McKechnie said the revenue miss was not a surprise given weak visibility expressed at the company's Feb. 24 analyst day, but operating expenses of $375 million-$380 million, vs. $398 million in Juniper's December quarter, were well below expectations.

McKechnie trimmed his $3.3 billion 2009 sales estimate to $3.1 billion and his 75 cents earnings per share forecast to 70 cents, but thinks the March quarter could mark the bottom for Juniper, and that the company can gain meaningful share in the enterprise IP gear market over the next 3-5 years. He has a $24

price target on the shares.

CarMax (KMX)

Credit Suisse downgrades to underperform from neutral

After hiking his stock target price on CarMax last month, Credit Suisse analyst Gary Balter reversed course on Apr. 8, downgrading the auto dealership and cutting his target price and profit estimate for the 2010 fiscal year in the wake of last week's earnings report. Balter lowered the target price by $1 to $9, its target before he assumed coverage of the stock.

Balter cites the price of the stock as one reason for his downgrade. Balter also says that the jump in used-car prices -- which led to CarMax's 72% jump in profit in its fourth quarter ended Feb. 28 -- is over, and prices have stabilized around current levels.

Balter doesn't see a recovery in car sales, either new or used, in the foreseeable future. The company's profit margin growth is unsustainable, he said, and legislation being proposed in Congress that would give government vouchers to consumers to trade in older cars for fuel-efficient new vehicles would eat into sales of the dealership's used cars.

Balter also cut his earnings per share estimate for fiscal 2010 (ending February) to 15 cents from 20 cents. He set a 30 cents per share profit estimate on the company for fiscal 2011.