Analyst Picks and Pans: TD Ameritrade, Cigna, Par Pharmaceutical
TD Ameritrade ()
FBR Capital Markets maintains market perform BMO Capital Markets maintains market perform
After the market closed Aug. 18, TD Ameritrade said its average daily client trading volume rose 21% in July compared with the same quarter year ago, but fell 2% from the previous month.
The June figure only includes a portion of trading from thinkorswim Inc., which Ameritrade recently acquired. The monthly decline was actually 8.6% if you account for a full month of trading at thinkorswim, FBR Capital Markets analyst Matt Snowling wrote in an Aug. 19 research note. That monthly decline was more than competitors, including Charles Schwab Corp. and TradeStation Group Inc., Snowling added.
However, that decline was not enough to sway Snowling to change his rating or price target as brokerages enter a seasonally slow period of trading.
Snowling said Ameritrade's stock is likely to trade in a narrow range in the near future as the interest-rate environment remains challenging on spreads. To account for the narrow interest-rate spreads and slowing trading activity, Snowling cut his fiscal fourth quarter and fiscal 2009 earnings estimates by 1 cent each.
He now expects Ameritrade to earn 26 cents per share during the quarter ended Sept. 30 and $1.13 per share for the fiscal year.
Analysts polled by Thomson Reuters, on average, forecast earnings of 17 cents per share for the fiscal fourth quarter and $1.01 per share for the year.
BMO Capital Markets analyst Michael Vinciquerra maintained a fourth-quarter earnings estimate of 19 cents per share based on current trading volume projections for the month. Vinciquerra wrote in an Aug. 19 research note that he expects August volume has to increase from July levels.
Snowling and Vinciquerra maintained identical $19 price targets on the stock.
Credit Suisse downgrades to neutral from outperform
A narrowing valuation disparity between the shares of managed care company Cigna and its competitors led Credit Suisse analyst Gregory K. Nersessian to downgrade the stock on Aug. 19.
Philadelphia-based Cigna also faces several issues that could affect operations next year and beyond, Nersessian said in a note.
"The essence of our call is that the valuation disparity between Cigna and its peers has narrowed considerably and its current discount to the peer group average better reflects its operating challenges than was the case earlier this year," he wrote.
He also cited Cigna's lack of capital flexibility, management turnover and inability to benefit from health care reform among other concerns.
Cigna announced in June the retirement of Chairman and CEO H. Edward Hanway at the end of 2009. The announcement came a month after former Chief Financial Officer Mike Bell resigned. President and Chief Operating Officer David M. Cordani will replace Hanway as CEO, and Annmarie Hagan has replaced Bell. Board member Isaiah "Ike" Harris Jr. will become non-executive chairman Jan. 1.
"Our primary takeaway is that we believe the 2010 national accounts selling season is going to be very competitive and that Cigna is likely to cede share to peers with more efficient medical and administrative cost structures," Nersessian wrote.
Par Pharmaceutical (PRX)
Caris & Co. upgrades to buy from above average
Already trading around annual highs, shares of Par Pharmaceutical rose Aug. 19 after the Food and Drug Administration approved the company's generic version of the Catapres TTS high blood pressure patch.
Par reported the approval after the close of trading Aug. 18, marking its second piece of good news in as many days. On Aug. 17, the company said it was successful in challenging the patent on the pain drug Ultram ER, which could allow the company to begin selling a generic version of that product.
Ultram ER, or extended-release tramadol, is sold by Biovail Corp. and Johnson & Johnson. Par said a U.S. District Court ruled in its favor by determining the patent supporting the drug, which belongs to Purdue Pharma, is not valid. The FDA has tentatively approved two versions of the drug made by Par.
Caris & Co. analyst David Moskowitz said the approval of generic Catapres -- also called clonidine -- gives Par "an amazingly strong platform of sustainable high-value generics, which will fund the continued ramp of the company's emerging brand business as well as follow-on generic opportunities."
Moskowitz raised his price target to $25 per share from $20. The analyst raised his 2010 profit estimate to $1.45 per share next year, from $1.30, and he said Par could top that amount if it does not face immediate competition for generic clonidine.