Analyst Picks and Pans: Tyco Electronics, Mohawk Industries

Tyco Electronics Ltd. (TEL)Citigroup keeps buy

Citigroup analyst Jim Suva said on June 16 that Tyco revised its third-quarter guidance upward, driven by better-than-expected trends in autos, undersea, and cost savings. He believes current Wall Street consensus estimates remain too low. He estimates $0.97 fiscal 2010 (ending June) earnings per share (EPS) for Tyco, vs. the Street's $0.71 consensus, given the company's current restructuring efforts, the likelihood of an eventual recovery in auto production, and the sustainability of Tyco's undersea cable business.

Suva kept his buy rating on the shares, as he thinks Tyco's valuation is attractive for prospects of the company's long-term fundamentals. He has a $25 target price.

Mohawk Industries (MHK)Cowen downgrades to neutral from outperform

On June 16, Cowen analyst Laura Champine said she sees little upside for Mohawk as she is unable to model for a material improvement in sales trends or return on invested capital (ROIC) in near-term. She noted that Mohawk will likely see the benefit of lower oil related costs in the second quarter; however, the commodity benefit will likely fade after the third quarter given recent moves in oil prices. She believes lower costs are reflected in Mohawk's second-quarter guidance, which came in well above consensus following first-quarter results reported on Apr. 24.

Champine noted that her $0.26 2009 loss per share estimate (under generally accepted accounting principles, or GAAP) is below the Wall Street consensus view of a $0.06 loss; her $1.83 2010 EPS estimate is also below the $1.98 Street consensus.

Ashford Hospitality Trust (AHT)R.W. Baird downgrades to underperform from neutral

Baird analyst David Loeb said on June 16 that increasing problems in Ashford's hotel lending portfolio create a negative catalyst. He notes Extended Stay America (ESA) filed for bankruptcy, affecting Ashford's $164 million note in ESA's mezzanine tranche six. Unfortunately, Loeb says Ashford has been taking lumps in its lending portfolio over the past few months, and he expects further problems to weigh on the shares.

Loeb continues to believe the company's high-risk high potential returns strategy will not be favored at this point in the cycle. He is keeping his $2 price target.

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