Analyst Picks and Pans: UAL, US Airways, Tiffany & Co.

UAL Corp. (UAUA) JP Morgan upgrades to overweight from underweight

JP Morgan upgraded shares of UAL Corp. and US Airways (LCC) amid improving liquidity positions. It said better-than-expected passenger demand, along with lower jet fuel prices and mild weather, has eased worries about potential bankruptcies among the legacy carriers.

"Our updated liquidity models, which now focus on both unrestricted cash and total cash ... suggest legacy covenants are cleared and liquidity for AMR, US Airways, and UAL proves adequate," said J.P. Morgan analyst Jamie Baker.

He upgraded UAL to overweight from underweight, and US Airways to neutral from underweight. He kept an overweight opinion on AMR (AMR).

But the analyst also downgraded JetBlue (JBLU) and AirTran (AAI) to neutral from overweight, citing his more optimistic outlook for UAL and US Airways.

Despite an easy comparison to this year's 17% drop in airline revenue, 2010 will likely be a lackluster year with revenue growth of no more than 5.5%, Baker said. From 2004 to 2008, annual industry revenue growth was in the 6% range.

Tiffany & Co. (TIF) Credit Suisse upgrades to outperform from neutral

Citing lower prices for precious metals and Tiffany & Co.'s strong brand, Credit Suisse analyst Paul Lejuez upgraded the shares to outperform from neutral and boosted his price target to $45 from $20.

Prices for platinum and silver have declined in fiscal 2009, and the analyst expects this will boost margins by fiscal year 2010. Platinum prices have fallen 43% from peak levels in 2008, while silver prices have dropped 26%, Lejuez said. Lower diamond costs might be an added benefit, as well.

Also, Tiffany has been careful to protect its brand by not slashing prices but by offering more items at lower prices. Its new collection of key pendants, for example, starts at $150. Tiffany, for the most part, has not been promotional like many other jewelers.

Because Tiffany's brand has remained intact, Lejuez said, it's plausible that productivity will start to improve. He called Tiffany's brand one of "prestige and aspiration."

"Tiffany has been careful to protect its brand image, and we believe this will enable an eventual recovery in top-line results," Lejuez wrote in a client note.

However, Lejuez said that Tiffany in the past five years had been helped by customers trading up to the brand as they felt wealthier, but these customers are unlikely to come back in the near future.

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