Analyst Picks and Pans: Amgen, Coinstar, American Woodmark

Amgen (AMGN)

Deutsche Bank keeps buy Lazard Capital Markets reiterates hold

Wall Street pored over new trial results for Amgen's anemia drug Aranesp on Aug. 26, with analysts differing on whether the data will be another hit to sales.

Late Aug. 25, Amgen reported results from a study called TREAT, which enrolled about 4,000 patients. Aranesp did not reduce death from any cause or heart complications, and it didn't increase the time before the patient died or needed to go on dialysis.

The drug is used to treat anemia caused by chemotherapy or for patients who have kidney failure. Other recent studies have linked Aranesp to increased tumor growth or death, and governments have cut back on reimbursement for the product, which has hurt sales.

Deutsche Bank analyst Mark Schoenebaum said the results won't have a great impact on sales of Aranesp because the drug is mostly used in patients who are already on dialysis. The TREAT study involved patients who had not yet undergone dialysis, which accounts for about $600 million in annual U.S. sales and a tenth of Amgen's profit, he said. Worldwide sales of the drug fell to $3.14 billion last year.

Schoenebaum noted one positive from the trial: Aranesp improved hemoglobin levels in the blood, which is a key part of treating anemia. "TREAT was, in our opinion, an oddly designed trial that is difficult to interpret and will likely have limited impact on estimates," Schoenebaum said.

Joel Sendek of Lazard Capital Markets took an opposite view. He said the results will hurt Aranesp sales, but said some of the data may be helpful. He said Aranesp did not significantly increase death despite its link to higher stroke risk, and said larger doses of Aranesp did not appear to increase the risk of death for patients.

Coinstar (CSTR)

Merriman Curhan Ford reiterates buy

Universal Pictures and Walt Disney Studios may be ready to sign distribution deals with Coinstar's subsidiary Redbox, the DVD kiosk company, Merriman Curhan Ford analyst Eric Wold said on Aug. 26.

In a note to investors, Wold wrote, "We would not be surprised to see a more formal distribution agreement announced" with The Walt Disney Co.'s (DIS) film studio, even though an arrangement already exists.

Universal may come around too, he said. Redbox has sued Universal, a subsidiary of General Electric (GE), over the kiosk business, but Wold said it is in the studio's "best interest to return to the table and negotiate a distribution deal."

Universal, like News Corp.'s (NWS) 20th Century Fox and Time Warner Inc.'s (TWX) Warner Bros., wants a grace period before Redbox makes their DVDs available as $1-per-night rentals in order to preserve DVD sales at retail stores. Redbox has sued the studios, claiming antitrust violations.

On Tuesday, Redbox announced a deal with Paramount Pictures. The Viacom Inc. (VIA)-owned studio signed a revenue-sharing deal to supply Redbox with new releases the day they go on sale. Paramount will get detailed rental information with an option to extend or end the deal after two years. Redbox now has deals with Paramount, Lions Gate Entertainment Corp. and Sony Corp.

As for Coinstar, said the growth of Redbox and coin-counting machines, an improving economy and a growing share of the market should drive better revenue and profit margins for the company.

American Woodmark (AMWD)

R.W. Baird downgrades to underperform from neutral

A weak recovery in housing markets will continue to hurt American Woodmark, R.W. Baird analyst Peter Lisnic said Aug. 26 as he downgraded the kitchen cabinet maker. Lisnic also lowered his price target to $19 from $24.

"While recent data suggests housing markets could be nearing a bottom, recovery is likely to be long and subdued in our opinion," he wrote in a client note.

American Woodmark is "executing well with earnings power likely structurally higher, but an improved demand environment and higher potential returns already appear amply discounted in the stock," he added.

The company posted a fiscal first-quarter loss on Aug. 25, citing double-digit sales declines for remodeling and new construction. For the quarter ended July 31, it posted an adjusted loss of $4.8 million, or 34 cents per share. Sales tumbled 28% to $100.8 million from $139.2 million.

Lisnic cut his fiscal 2010 per-share estimate to a loss of 90 cents from a profit of 20 cents. He reduced his 2011 estimate to a loss of 10 cents per share from a profit of 60 cents per share.

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