Stock Picks: Juniper, Goodyear, Abercrombie & Fitch

Juniper Networks (”JNPR”)

Oppenheimer upgrades to outperform from perform

Oppenheimer analyst Ittai Kidron upgraded shares of Juniper Networks on Nov. 13, saying the company is poised to benefit from a recovery in spending by telecom carriers in 2010. Kidron established a price target of $31 on the shares.

In addition to the carrier spending recovery, Kidron expects data center consolidation and virtualization to “open the door for Juniper” to expand its presence in the enterprise, or corporate, market and gain market share. Virtualization technology helps save companies money by allowing one computer to act as several machines.

Juniper’s shares had retreated somewhat on Nov. 12 after Hewlett-Packard (”HPQ”) said it would buy 3Com (”COMS”), leaving Juniper out of a consolidation move in the networking equipment market. But Kidron said Friday while HP is a missed opportunity when it comes to manufacturers, IBM (”IBM”) and Dell (”DELL”) offer “material,” multiple-year opportunities for Juniper to outpace expectations. He called the company an attractive long-term holding.

”Goodyear (”GT”)

Goldman Sachs upgrades to buy from neutral; raises estimates, price target

Goldman analyst Patrick Archambault said on Nov. 13 that Goodyear shares fell 20% since third-quarter results were released Oct. 28, based on weak fourth-quarter guidance. While he was surprised by the fourth-quarter outlook, Archambault said the shortfall was largely driven by the transitory accounting impact of production cuts, which doesn’t affect his long-term outlook.

The analyst expects to see big earnings per share (EPS) improvement after the fourth quarter due to increased consumer tire demand, improved fixed cost absorption benefits, and cost reductions from better manufacturing flexibility afforded by the company’s new contract with the United Steel Workers. He raised his 95 cents 2010 EPS estimate to $1.05 and his $1.77 EPS forecast for 2011 to $1.88; he also hiked his $17 six-month price target to $19.

”Abercrombie (”ANF”)

UBS keeps neutral

UBS analyst Roxanne Meyer said on Nov. 13 that A&F’s third-quarter EPS of 30 cents (excluding items) beat Wall Street’s consensus estimate of 20 cents EPS and her own 16 cents EPS estimate. She noted that expense line items came in well below the company’s earlier guidance, likely benefiting from expense efforts, among other things. Meyyer also noted that A&F’s gross margin beat estimates.

Despite a year-over-year in third-quarter EPS, and low visibility as to improvement in U.S. trends, Meyer expected A&F stock to react well on Nov. 13. She said her EPS estimates of 90 cents for fiscal 2010 (ending January) and $1.49 for fiscal 2011 -- and her $32 price target on the stock -- are under review. URS Corp. (”URS”)

Broadpoint AmTech upgrades to buy from neutral

Broadpoint analyst Will Gabrielski said on Nov. 1 that URS’s $2.32 billion in revenues and 79 cents EPS for the third quarter beat his respective $2.31 billion and 68 cents estimates. Gabrielski believes URS is one of the best-positioned names in engineering and construction (E&C) for 2010. He thinks now is the time to get back into the stock, as investors have fully digested soft second-half results, and new awards at the company have recovered. He noted that the company’s backlog exiting the third quarter was a solid $17.9 billion.

As 2010 nears, the analyst believes visibility regarding federal infrastructure spending should improve and the industrial market should recover, so the company should start to see benefits of increased Federal spending in its key end-markets. He sees EPS of $3.00 in 2009 and $3.15 in 2010. He sets a $50 price target.

Microsemi Corp. (”MSCC”)

Needham & Co. upgrades to buy from hold; raises estimates

Needham analyst N. Quinn Bolton aid on Nov. 13 that Microsemi’s upgrade follows a fourth-quarter report that yielded no surprises for him. He believes business at Microsemi has stabilized and expects the company to generate stable sequential revenue growth in the future. Bolton said cost cuts at the company should allow it to deliver strong operating leverage and generate expanding free cash flow. He is also encouraged by a recovery in the company’s analog/commercial business, and expects the difference between GAAP and non-GAAP margins to tighten after the December quarter.

Bolton raised hiss $1.07 fiscal 2010 (ending September) pro-forma EPS estimate to $1.10 and his $1.40 fiscal 2011 forecast to $1.42. He set an $18 price target on the shares.

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