Analyst Picks and Pans: Valero, Molson Coors, Hovnanian

Valero Energy Corp. (VLO)

Deutsche Bank cuts estimates

On June 2, Valero Energy Corp. said it expects to post a loss of about 50 cents per share in its second quarter, and also announced plans to sell more than 40 million common shares in a public offering.

Results have been affected by downtime at two of its refineries, and lower diesel margins and sour crude oil discounts, the company said. The forecast widely misses analysts' average estimate for quarterly profit of 74 cents per share, according to a Thomson Reuters poll. Analysts typically exclude one-time items.

Meanwhile, Valero said it plans to use the proceeds to fund general corporate purposes and recent acquisitions. Valero recently bought Dow Chemical's stake in a Netherlands-based refiner for $600 million. Barclays Capital and JPMorgan Securities are underwriting the offering, and will have the option of buying an additional 6 million shares.

On June 3, Deutsche Bank analyst Paul Sankey cut his full-year profit estimate for the company to 94 cents per share, down from an earlier estimate of $2.22 per share, in response to Valero's news. Sankey warned that right now it's hard to grasp how the company's earnings will fare in the second half of the year as there is little information available on its recently acquired ethanol and European refinery businesses.

Sankey rates Valero hold with a $20 price target.

Molson Coors Brewing Co. (TAP)

Stifel Nicolaus raises estimates, price target

An appealing stock price and the likelihood of earnings growth prompted analyst Mark Swartzberg of Stifel Nicolaus & Co. to boost his price target for Molson Coors Brewing Co. on June 3.

Swartzberg said in a client note that MillerCoors, the brewing company's joint venture with SABMiller, "is producing strong double-digit EBITA (earnings before interest, taxes and amortization) growth."

The analyst said MillerCoors also looks to benefit from new cost cutting measures set to be announced later this year. Swartzberg expects MillerCoors to realize savings of $500 million.

Swartzberg increased the Denver-based company's price target to $54 from $48.

The analyst also boosted his 2009 earnings-per-share estimate to $3.37 from $3.28 and lifted his 2010 forecast to $3.93 from $3.70. He cited updated currency exchange rates and lower estimates for commodity cost increases.

Hovnanian Enterprises Inc. (HOV)

Credit Suisse raises estimates

Credit Suisse analyst Daniel Oppenheim boosted his expectations for homebuilder Hovnanian Enterprises Inc. after it posted a narrower loss in its second quarter, but warned that a higher stock price was dependent on a recovery in the broader housing market.

Aggressive pricing of houses is eating into revenues, Oppenheim said in a note to investors June 2, and sales will remain weak. He raised his earnings estimates, but still sees operating losses through 2010.

After the close of trading June 2, Hovnanian said it lost $118.6 million, or $1.50 a share, for the three months ended April 30. Last year, it lost $340.7 million, or $5.29 per share. Revenues fell by nearly half to $398 million.

Oppenheim said orders for new homes, which fell 29%, were above his expectations -- likely due to low prices set by the company. He boosted his estimates for 2009 and 2010 to narrower losses of $5.60 per share and $2.05 per share, respectively, from $7.75 per share and $3.05 per share.

Oppenheim also raised his target price by $1.50 to $2 -- but said that stock price was dependent on a recovery in the housing market.

Oppenheim also said it was a plus that Red Bank, N.J.-based Hovnanian repurchased $525 million of debt, boosting its liquidity, but write-downs on the value of land more than offset those gains.

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