Analyst Picks and Pans: SAIC, ADC Telecom, Hot Topic


Stifel Nicolaus raises estimate

Stifel analyst William Loomis said on June 4 that SAIC posted first-quarter results that were better than expected, and left fiscal 2010 (ending January) guidance unchanged despite uncertainty around its largest contract, in which SAIC is still in negotiations with the U.S. Army. Loomis noted that the company cited strong contract awards and strength in its overall business for the confidence it can still achieve prior fiscal-year guidance.

Loomis kept his buy rating on the shares, supported by its position in Government IT and Professional Services, strong free cash flow generation, and his expectation for EPS growth of 10%-12% ant a compounded annual rate over the next few years. He raised his $1.20 fiscal 2010 EPS estimate to $1.22. Loomis has a $24 price target on the shares.

ADC Telecommunications (ADCT)

Jefferies raises estimates, target

Jefferies analyst George Notter said on June 4 that ADC's $0.05 non-GAAP second-quarter EPS beat his $0.04 estimate. He noted that management is guiding for third-quarter revenues of $265 million-$290 million and non-GAAP EPS of $0.02-$0.10, but he thinks the guidance is conservative. Notter sees a number of catalysts for the stock, including any top-line recovery of ADC's international sales and/or Enterprise business; further cost reductions and/or any improvement in Network Solutions profitability; the government's Broadband Stimulus package; and any recovery on ADC's auction rate securities debacle.

Notter raised his $0.12 fiscal; 2009 (ending October) EPS forecast to $0.20, his $0.30 fiscal 2010 estimate to $0.50, and his $5.50 price target on the stock to $9.00.

Hot Topic (HOTT)

William Blair cuts estimates

William Blair analyst Sharon Zackfia said on June 4 that Hot Topic's May sales failed to improve from the -6% same-store sales, or comp, trend in the first three weeks of the month, with comps -6.4% against a -0.2% comparison. She noted that results missed analysts' consensus forecast for a -4% comp, while marking an end to three straight quarters of positive comp gains.

Given the soft start to the second quarter, Zackfia cut her comp projection to -6% from -4%, and her fiscal 2010 (ending January) forecast to -4% from -3%. She widened her $0.05 second-quartrer loss per share estimate to a $0.06 loss, at the low end of the company's $0.04-$0.06 loss guidance. She cut her $0.34 fiscal 2010 EPS estimate to $0.31, kept her $0.35 fiscal 2011 estimate, and maintained her market perform rating on the shares.

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