Picks of the Week: Autodesk, Dell, Hewlett-Packard, Wal-Mart

Notable Wall Street analyst opinions on stocks in the news for the week of Feb. 16-Feb. 19:

Feb. 16

Autodesk Inc.: Goldman Sachs analyst Derek Bingham raised his rating on shares of Autodesk Inc. (ADSK) to buy from neutral on Feb. 16.

In a note, Bingham said his upgrade of the biggest maker of engineering-design software was based on his view that "the majority of macro indicators we track are now showing stability or

Improvement", and his latest contacts with Autodesk customers "suggest improved momentum in the new year".

"We believe that a firmer top-line can help to catalyze significant, sustained operating margin recovery from fiscal 2011 levels near 16% to prior peak levels of mid-to-high 20% over the next 3 years," the analyst wrote.

Ahead of the company's fourth-quarter fiscal 2010 earnings release on Feb. 23, Bingham lifted his fiscal 2011 non-GAAP EPS estimate from $1.06 to $1.12; he kept his fiscal 2012 projection at $1.50. He raised his 12-month price target to $30 from $27.

Teva Pharmaceutical Industries Ltd.: Deutsche Bank analyst David Steinberg reiterated his buy rating on shares of Teva Pharmaceutical Industries Ltd. on Feb. 16.

Teva, the world's largest maker of generic drugs, said on Feb. 16 that fourth-quarter profit rose 28% on revenue from its top-selling product, the Copaxone multiple sclerosis treatment. Net income excluding costs linked to the 2008 purchase of Barr Pharmaceuticals Inc. climbed to $847 million, or 94 cents a share, from $662 million, or 80 cents. Earnings fell short of the average estimate of 95 cents a share from 19 analysts surveyed by Bloomberg.

Teva management reaffirmed its previous 2010 EPS guidance of $4.40 to $4.60 on revenue of approximately $16 billion.

In a note, Steinberg said that given the company's "solid" revenue performance, he believes the slightly lower than expected bottom-line result vs. his forecast was attributable to the impact of foreign currency translation and a less favorable product mix, that resulted in higher revenues as well as higher operating expenditures; and higher than estimated losses from associated companies.

Steinberg noted that revenues were driven by strong year-over-year performances in all of Teva's key geographic regions, benefiting from continued strong growth of the company's key branded franchises including Copaxone and Azilect, and its respiratory business.

The analyst said that his buy rating is based on the company's "still rich" generic pipeline; competitive advantages and efficiencies achieved via its global supply chain; continued strength from its branded, proprietary products; the "outstanding" track record of management; and synergies and revenue opportunities still to be derived from the acquisition of Barr Labs.

Steinberg has a 12-month price target of $68 on the stock.

Feb. 17

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.

Feb. 18

Wal-Mart Stores Inc .: Goldman Sachs analyst Adrianne Shapira reiterated a buy rating on shares of Wal-Mart Stores Inc. (WMT) on Feb. 18.

The world's largest retailer reported fourth-quarter sales that trailed its projection on Feb. 18 after cutting grocery and electronics prices. Sales at U.S. stores open at least a year fell 1.6%; Wal-Mart had projected sales to decline no more than 1%. Net income in the fourth quarter ended Jan. 31 increased 22 % to $4.63 billion, or $1.21 a share, from $3.79 billion, or 96 cents, a year earlier. Excluding a tax benefit and a restructuring charge, profit totaled $1.17 a share, topping the $1.12 expected by analysts. Revenue advanced 4.5% to $113.7 billion, trailing analysts' estimates.

The retailer forecast first-quarter comparable-store sales in the U.S. to be unchanged, plus or minus 1%. First-quarter profit will be 81 cents to 85 cents a share, Wal-Mart said. Analysts on average anticipate 85 cents.

In a note to clients, Shapira said that Wal-Mart's fourth-quarter operating earnings per share (EPS) of $1.17 surpassed her forecast of $1.12 and the company's guidance of $1.08-$1.12. Shapira said better than anticipated gross margin improvement, expense control, and foreign currency gains "drove the quarter's upside". She noted that same-store sales declined 1.6%, as she had expected, due to price deflation within the food and consumer electronic categories.

"While current sales trends are being hampered by food and consumer electronics deflation, firs-quarter [sales] should be the last tough comparison as pressure should moderate and deliver better second-half [sales] against easy year-ago comparisons," Shapira said.

Shapira's price target remained unchanged at $58. The stock is included in Goldman's Americas Buy List.

Hewlett-Packard Co.: Raymond James analyst Brian Alexander maintained a strong buy rating on shares of Hewlett-Packard Co. (HPQ) on Feb. 18.

After the close of trading Feb. 17, HP, the largest personal-computer maker, posted fiscal first-quarter profit and sales that beat analyst estimates. Excluding some costs, first-quarter profit was $1.10 a share. Analysts projected a profit of $1.06, according to a Bloomberg survey. The company also raised its full-year forecast and said it would hire more salespeople this year.

In a note to clients, Alexander said HP reported "very strong" first-quarter results, with revenue growing 8% year-over-year to $31.2 billion. He said HP is "leveraging its portfolio breadth and scale to gain share in an improving IT demand environment".

"HP is extremely well positioned to penetrate faster growing, higher margin segments of the IT ecosystem and will be a primary beneficiary of the catch-up period for enterprise IT investment in 2010," Alexander wrote.

The analyst maintained a price target of $62.

Feb. 19

Dell Inc.: R.W. Baird analyst Jayson Noland maintained a neutral rating on shares of Dell Inc. (DELL) on Feb. 19. After the close of trading Feb. 18, the world's third-largest personal-computer reported that holiday sales of low-priced PCs and higher component costs http://www.businessweek.com/news/2010-02-19/dell-declines-after-price-cuts-component-costs-crimp-earnings.html. Gross margin, the percentage of sales that remain after deducting production costs, was 17.4%, below the 18% projected on average by analysts.

Fourth-quarter net income slipped to $334 million, or 17 cents a share, from $351 million, or 18 cents, a year ago. Sales rose 16% to $14.9 billion, beating the average estimate of $13.8 billion. Profit before some costs was 28 cents a share.

Noland said in a Feb. 19 note that fourth-quarter earnings per share (EPS) and revenue figures exceeded the Wall Street consensus view. He said the revenue outperformance were due to better-than-expected results from the company's hardware businesses. Noland noted that gross margins were down 90 basis points from the preceding quarter, which management attributed to increased contribution the Consumer segment and component constraints.

The analyst cut his $1.32 fiscal 2011 (ending January) EPS estimate to $1.26. He said he "remains on the sidelines" given concerns around the timing of a broad-based PC replacement cycle, the integration of the acquired Perot Systems unit, and further acquisitions. He has a $17 price target on the shares.

CBS Corp.: Goldman Sachs analyst Drew Borst reiterated a neutral opinion on shares of CBS Corp. (CBS) on Feb. 19.

After the close of trading Feb. 18, CBS, owner of the most-watched U.S. broadcast network, said fourth-quarter profit fell 57% after advertising sales dropped at its radio stations and billboard unit. Net income declined to $58.8 million, or 9 cents a share, from $136.1 million, or 20 cents, a year earlier. Excluding a writedown to the value of radio assets and other items, profit of 25 cents met the average of analysts' estimates compiled by Bloomberg.

Borst said in a Feb. 19 note that the adjusted earnings per share (EPS) figure of 25 cents was in line with his estimate and the consensus view of Wall Street analysts. Revenue was 2% ahead of his estimate, but EBITDA (earnings before interest, taxes, depreciation and amortization) missed his estimate by 4% due to higher than expected operating expenses at the company's entertainment division. Borst said CBS highlighted three themes for 2010, which he believes are largely factored into 2010 consensus estimates: better advertising trends, cost cutting, and rising retransmission fees from cable operators.

Borst noted that in a departure from the past, the company did not provide 2010 EBITDA guidance. He raised EPS estimates for 2010 to 93 cents from 90 cents; for 2011 to $1.13 from 98 cents; and for 2012 to $1.26 from $1.09. He also increased his 12-month price target to $14 from $13.

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