Analyst Picks and Pans: BKC, ADBE, S, MEE

Burger King Holdings (BKC)

BofA/Merrill upgrades to buy from neutral

BofA/Merrill analyst Joseph Buckley said on May 4 that while Burger King has struggled in fiscal 2009 (June) with high food costs and more sluggish domestic sales, other factors, he upgraded the shares for many reasons. Buckley said the company's shares are selling at a 20%-30% discount to other global, highly franchised QSR (quick service restaurant) stocks; food costs are abating, which should relieve some of pressure on company restaurant margins; and soft March monthly sales were contrary to a long-term sales record of 20 straight quarters.

Most importantly, said Buckley, the growth components of Burger King's business plan remain in place. He has a $22 price target on the stock.

Adobe Systems (ADBE)

UBS Financial downgrades to neutral from buy

UBS analyst Heather Bellini said on May 4 that while she continues to see Adobe's sales environment as stabilizing, her checks suggest top-line numbers are unlikely to move materially higher after the company's release of second-quarter results on June 16.

Bellini noted that she sees $700 million in second-quarter sales, vs. the $695 million Wall Street consensus view, and company guidance of $675 million-$725 million; she also sees $0.34 EPS (in line with the consensus view) vs. Adobe's guidance of $0.31-$0.38. Given the 64% run-up in stock since the Mar. 9 market bottom, Bellini believes we need to see upside to numbers for stock to move materially higher. The analyst increased her $25 price target to $28.

Sprint Nextel (S)

Wachovia maintains market perform

Wachovia analyst Jennifer Fritzsche said on May 4 that Sprint's first quarter was solid, and she believes better EBITDA and free cash flow than her estimates demonstrates that the substantial cost-cutting initiatives the company is making are gaining traction. She noted that management continued to express enthusiasm about trends it is seeing in Boost Unlimited iDEN plan. However, Fritzsche believes that despite a strong quarter of Boost Unlimited net adds, the trend in postpaid subscriber losses, which accelerated from the fourth quarter and were as negative as they've been for a number of quarters, continues to be worrisome.

Massey Energy (MEE)

Goldman Sachs upgrades to buy

Goldman boosted its coal industry view to attractive from neutral on May 4. Goldman analyst Brian Singer said he thinks expectations for China's economic growth will rise in coming months, which could improve sentiment, and ultimately global demand for metallurgical coal. He also expects less coal-to-gas substitution during the summer months; he sees natural gas prices rising in the next six months (which should improve coal prices), and expects U.S. coal inventories to peak in April on a days-of-demand basis. He also noted that coal stocks trade below historical multiples.

Singer added Massey shares to the firm's Conviction List Buy, with a $26 6-month price target; the stock was rated neutral.

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