Stock Picks: McAfee, Estee Lauder, Harman

McAfee (MFE)

R.W. Baird upgrades to outperform from neutral; raises price target

R.W. Baird analyst Steven Ashley said on Oct. 30 that McAfee reported in-line third-quarter revenue of $485 million and earnings per share (EPS) of 62 cents compared to consensus estimates of $486 million and 61 cents and his forecast of $489 million and 62 cents. Ashley expects investors to come away from the third quarter with mixed emotions, which he views as an opportunity. He noted concerns might include: 1) whether PC OEM deals really provide adequate return on investment; 2) challenges in closing very large deals; and 3) Symantec's (SYMC) improved execution in its consumer business.

On the positive side, Ashley notes that: 1) The company's OEM deal with Dell (DELL) was extended two years; and 2) Symantec's fourth quarter revenue guidance was above the Wall Street consensus. He raised his $45 price target to $50.

Estee Lauder (EL)

Wedbush Morgan reiterates outperform; raises estimates, price target

Wedbush analyst Rommel Dionisio said on Oct. 30 that Estee Lauder's $1.852 billion first-quarter revenue was relatively in line with his estimates, but the company's adjusted EPS of 85 cents far exceeded his recently raised 40-cent view, and management's revised 23 cents-30 cents estimate. Dionisio tied the company's outperformance to much lower-than-expected SG&A spending in the face of a challenging global economy. He noted that the Asia Pacific and travel retail operations were particular bright spots in the first quarter.

The analyst raised his $1.80 fiscal 2010 (ending June) EPS estimate to $2.07, and hi $2.03 fiscal 2011 forecast to $2.07, after Estee Lauder lifted its fiscal 2010 view to $1.95-$2.10 from $1.55-$1.70. He raised his $48 price target to $50. Harman International (HAR)

RBC Capital upgrades to outperform from sector perform

RBC Capital analyst Scot Ciccarelli said on Oct. 30 that Harman has already delivered $243 million in cost savings, well ahead of plan, and remains on target for $400 million in total savings. Ciccarelli said profitability improvement in the company's auto segment has been material, as substantial cost cutting has aided the pickup in unit volume. He also noted that a contract award from Toyota (TM) is a major positive.

The analyst revised his fiscal 2010 (ending June) estimate from a loss of 70 cents per share to EPS of 40 cents, and raised his 65 cents fiscal 2011 EPS estimate to $1.20; he set a fiscal 2012 EPS estimate of $1.70. He raised his $22 price target to $42.

Stanley, Inc. (SXE)

Wells Fargo upgrades to outperform from market perform; raises estimates, valuation

Wells Fargo analyst Edward Caso said on Oct. 30 that despite intra-quarter concerns about the pace of new business, Stanley's $217 million in second-quarter revenue and EPS of 49 cents easily topped his $208 million and 41 cents estimates, respectively. He added that, while the company's book-to-bill ratio was 0.8, it was much better than expected, and the third quarter has gotten off to a very strong start with the majority of the work being "new." Caso said second-quarter upside came from better contract performance and SG&A leverage.

The analyst raised his $1.71 fiscal 2010 (ending March) EPS estimate to $1.88 and his $1.92 fiscal 2011 EPS forecast to $2.05; he also hiked his $29-$31 valuation to $32-$34.

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