Stock Picks: Dell, Whole Foods, Coinstar, ValueClick

Wall Street analyst opinions on stocks making headlines in Wednesday's market

Dell Inc.: Kaufman Bros. analyst Shaw Wu maintained a hold rating on shares of Dell Inc. (DELL) on Feb. 17 ahead of the company's fiscal fourth-quarter earnings release, scheduled after the close of trading Feb. 18.

Wu said in a note to clients that he believes Dell, the world's third largest maker of personal computers, will likely meet or beat consensus estimates of $13.9 billion in revenue and 27 cents in earnings per share (his own forecasts call for revenue of $14 billion and EPS of 30 cents).

"Our industry and supply chain checks indicate stronger end markets as indicated by technology peers Apple [AAPL], Intel [INTC], Microsoft [MSFT], Cisco [CSCO], and Seagate [STX]," Wu wrote. He noted that that expectations are "fairly low" after a sizable earnings miss by Dell in its October quarter. His estimates include results of Perot Systems, which Dell acquired in the quarter.

"One lingering concern we continue to have is that Dell continues to grow slower than its peers, meaning further market share losses," Wu wrote.

"Another issue we continue to have with Dell is its quality of earnings and aggressive use of one-time items", Wu wrote, citing a recent Wall Street Journal article on the topic. Wu said that in its last reported October quarter, Dell had 6 cents in one-time items. "As we have said in the past, one has to wonder if Dell, or any other company for that matter, can continue to classify restructuring expenses as one-time items when they keep recurring," Wu said.

The analyst has a $13 price target on the shares.

Whole Foods Market Inc.: Standard & Poor's equity analyst Joseph Agnese raised his recommendation on shares of Whole Foods Market Inc. (WFMI) to hold from sell on Feb. 17. The largest U.S. natural-goods grocer reported higher than expected fiscal first-quarter earnings and raised its full-year profit forecast after the close of trading Feb. 16.

Whole Foods said 2010 earnings may total $1.20 a share to $1.25 a share in fiscal 2010 (ending September), up from a previous forecast of $1.05 to $1.10. Analysts predicted $1.09, the average of 16 estimates in a Bloomberg survey.

In a posting on the S&P MarketScope service on Feb. 17, Agnese noted that Whole Foods reported December-quarter EPS of 32 cents, vs. 20 cents one year earlier, 7 cents above his estimate. Agnese said comparable-store sales increased 3.5%, above his 3.0% estimate, reflecting growth in store traffic, improvement in average transaction sizes and easier comparisons. The analyst also said the company's EBITDA margins widened "significantly more than we expected" as improvement in comparable-store sales led to increased operating leverage.

Noting that the "favorable" comparable-store trends have continued in the March quarter, Agnese raised his fiscal 2010 EPS estimate by 20 cents to $1.20 and his 12-month price target by $6 to $33.

Coinstar Inc.: Wedbush Morgan analyst Michael Pachter kept an outperform rating on shares of Coinstar Inc. (CSTR) on Feb. 17. On Feb. 16, the company's Redbox unit, which rents movies for $1 a day from vending machines, reached an agreement with Warner Bros. that gives the studio 28 days to sell DVDs before they become available in the company's kiosks. The two-year accord ends a lawsuit Redbox filed against the Time Warner Inc. (TWX) film studio in August to gain access to the latest movies.

As a result of the agreement, Coinstar said it expects first-quarter revenue of $315 million to $335 million and fully diluted earnings of 8 cents to 14 cents a share. The company also reaffirmed previous guidance for 2010, predicting revenue of $1.47 billion to $1.57 billion and earnings of $1.50 to $1.65 a share on a fully diluted basis.

In a Feb. 17 note, Pachter said the settlement is a positive step in Coinstar's "tense" relationships with film studios (lawsuits against Fox and Universal remain outstanding).

Pachter cut his $1.52 billion 2010 revenue estimate to $1.48 billion, reflecting some loss of business due to the 28-day window. He said he still sees $1.75 EPS in 2010, and maintained a $35 target price on Coinstar shares.

ValueClick Inc.: Canaccord Adams analys Jeff Rath lowered his rating on shares of ValueClick Inc. to hold from buy on Feb. 17.

In a note, Rath said that the Internet advertising company reported "mixed" fourth-quarter results after the close of trading Feb. 16, with revenue of $110.4 million and EPS of 20 cents due to the preannounced sale of non-core lead-generation assets. Rath added that ValueClick management provided first-quarter guidance for revenue of $93 million to $97 million and EPS of 10 cents to 11 cents.

Rath said ValueClick is taking steps to realign its business segments following the divestiture of its Web Clients business, and is also combining its search and comparison shopping segments under a new category called "O&O" (owned and operated websites). The new category will focus on building and monetizing sites to drive organic traffic, Rath noted.

"We think this represents a positive step by the company in remaking its image as purely a network play into a publisher/content provider," the analyst wrote. "However, this also suggests, based on guidance, that O&O may continue to deteriorate, and may decline throughout 2010."

Rath reduced his price target on ValueClick shares to $9 from $15.

Before it's here, it's on the Bloomberg Terminal.