Analyst Picks and Pans: Bed Bath & Beyond, Jefferies, VCA

Bed Bath & Beyond Inc. (BBBY)William Blair & Co. keeps outperform Deutsche Bank keeps hold FBR Capital Markets keeps market perform

Analysts were upbeat about Bed Bath & Beyond Inc. on June 25, saying the retailer had picked up market share after the liquidation of Linens 'N Things and improved profit results by controlling costs.

The Union, N.J.-based company said fiscal first-quarter profit climbed 14% as sales as it drew more customers who would have normally gone to Linens 'N Things. It was the second quarter in a row that the retailer had beat the Wall Street consensus.

"We believe industry consolidation is paving the way for Bed Bath & Beyond to accelerate share gains and eventually recapture gross margin sacrificed in a period of heightened promotion," William Blair & Co. analyst Jack Murphy told investors in a research report.

Same-store sales at stores open at least a year fell 1.6%, slightly better than analysts had forecast.

Deutsche Bank analyst raised an earnings forecast for fiscal 2009 to $1.73 per share and for fiscal 2010 to $1.94 per share. Baker also raised his price target to $30 from $28.

FBR Capital Markets analyst Stephen Chick said same-store sales and profit margins were worse than he had expected. "We are constructive; yet are not inclined to chase the stock here," Chick said.

Jefferies Group Inc. (JEF)FBR Capital Markets raises estimates Fox-Pitt Kelton raises estimates

Jefferies Group released a surprisingly strong outlook for its second quarter and analysts raised their earnings estimates for the next two years.

On June 24, the investment bank said it would earn more than $50 million on revenue of more than $500 million for the quarter ending June 30.

FBR Capital Markets analyst Steve Stelmach said in a June 25 note to investors that Jefferies' second quarter would be "as good as it gets" for the investment bank. He added that investors should not expect that the "confluence of positive factors" that boosted the quarter to continue, he said. Among those positive factors were the shrinking of interest-rate spreads, the difference between yields on riskier corporate bonds and higher-rated bonds.

He nonetheless raised his earnings estimates for this year and 2010.

Fox-Pitt Kelton analyst David Trone boosted his earnings estimates, too. In a June 25 research note, he raised his target price on the stock to $23 from $18, saying Jefferies took advantage of the financial turbulence of the past months to expand its business. The bank is now in a good position to "fill the competitive void that has been left by larger peers in the wake of the financial crisis."

Jefferies is expected to report second-quarter financial results on July 21.

VCA Antech (WOOF)SunTrust Robinson Humphrey upgrades to buy from neutral

Veterinary hospital operator VCA Antech Inc. should report improved results from hospital and laboratory testing activities when it posts its second-quarter earnings next month, SunTrust Robinson Humphrey analyst Jonathan Block said June 25.

Based on a survey of 400 animal hospitals run by VCA Antech competitors, he said hospital revenue should be better than it was in March and said he expects that will be the case for the rest of this year.

Block set a price target of $30 per share. VCA Antech hasn't traded at that level since late September, and the target implies shares will rise 23.3% over the next year.

VCA Antech shares closed at $24.34 on Wednesday.

The Los Angeles company runs about 470 animal hospitals, and they provide about 75 percent of its revenue. Block added that laboratory testing volume appears to be down slightly, but the company should make more money from testing because of an increase in prices.

According to Block, 40 percent of the survey respondents said business is better than it was three months ago, although economic conditions are still difficult.

"A modest reacceleration in VCA Antech's s two primary businesses should be well received. This will help confirm that the worst is over," he wrote.

The company is scheduled to report its second quarter results in mid to late July.