Stock Picks: Ann Taylor, Arrow, Electronic Arts, Sirius XM
Ann Taylor Stores Corp.: Jesup and Lamont equity analyst Barbara Wyckoff raised a rating on shares of Ann Taylor Stores Corp. (ANN) to buy from hold on May 4, with a $28 price target on the shares.
Shares of the women's clothing retailer rose as much as 10% in New York trading May 4 after first-quarter sales topped its previous forecast, based on preliminary results. Sales were about $475 million, compared with a prediction for $445 million, Ann Taylor said in a statement.
In a note, Wyckoff said that the upgrade followed the company's announcement that of higher fiscal 2010 first-quarter sales and margin vs. management's original guidance. She said her revised earnings per share (EPS) estimate of 34 cents for the quarter is based on the company's guidance issued on May 4. The company's first-quarter comparable-store sales were up 11% vs. Wyckoff's estimate of 10%; e-commerce sales were up 50%. Wyckoff noted that gross margin is projected to be up 350 basis points to 59% of sales from 55.5%.
"Clearly, ANN's new product mix and improved sourcing is helping drive regular price sales against easy last-year comparisons," the analyst wrote.
"[T]oday's announcement is a game changer and therefore we are upgrading ANN," Wyckoff said.
Arrow Electronics Inc.: UBS Securities analyst Amitabh Passi Maintained a buy rating on shares of Arrow Electronics Inc. (ARW) on May 4. He raised a price target on the shares to $35 from $33.
On May 3, the distributor of electronic components predicted second-quarter profit excluding some items of at least 78 cents a share, topping the average analyst estimate of 66 cents in a Bloomberg survey.
Passi said in a note that Arrow reported revenues of $4.235 billion and EPS of 76 cents, ahead of the respective Wall Street consensus estimates of $4.077 billion and 60 cents. He said the company's June-quarter guidance of $4.3 billion to $4.6 billion in revenues and 78 cents to 86 cents EPS was also ahead of the consensus forecasts of $4.235 billion and 66 cents, primarily on strength in Arrow's components segment.
Passi raised estimates for calendar 2010 to revenues of $17.7 billion from $16.8 billion and for EPS to $3.22 from $2.43; for calendar 2011, he hiked his estimates to revenues of $18.6 billion from $17.5 billion and EPS of $3.50 from $2.89.
Electronic Arts Inc.: Kaufman Bros. equity analyst Todd Mitchell reiterated a buy rating and $23 price target on shares of video-game maker Electronic Arts Inc. (ERTS) on May 4.
Mitchell said in a note that Electronic Arts will report fiscal 2010 fourth-quarter results after the close of trading May 11. He said that on Apr. 16 he raised a fiscal 2011 EPS estimate and price target for the company, due to evidence of better-than-expected sales of Battlefield: Bad Company 2, Mass Effect 2, and Dante's Inferno during the quarter, and "because we believe better retail sales in 2Q10 should support stronger valuations for the [video-game] group as a whole".
The analyst increased his projections for fourth-quarter revenues to $843 million from $800 million, and for EPS to 7 cents from 5 cents. He said his estimate implies fiscal 2010 revenue of $4.15 billion and non-GAAP EPS of 45 cents. He forecasts fiscal 2011 revenues of $3.9 billion and non-GAAP EPS of 70 cents.
"After a three-year hiatus, we expect video game industry earnings to return to a normalized basis in 2010, through a combination of improved profitability in core packaged goods businesses and a shift in revenue mix to a greater percentage of higher-growth, higher-margin digital revenue," the analyst wrote. "The turnaround at EA in fiscal 2011 will primarily be because of the former."
Sirius XM Radio Inc.: Standard & Poor's equity analyst Tuna Amobi maintained a hold opinion and $1.50 price target on shares of Sirius XM Radio Inc. (SIRI) on May 4.
Amobi said in a posting on the S&P MarketScope service that the company's first-quarter EPS of 1 cent, vs. a 7-cent loss per share one year earlier, was 1 cent above his estimate.
"We see continued auto OEM channel momentum, vs. persistent retail after-market woes, as SIRI now looks to [the] used car market," Amobi wrote. He said Sirius XM affirmed over 500,000 net subscriber additions in 2010, 20% adjusted EBITDA growth, and positive free cash flow.
"With delisting (and reverse split) clouds dissipating, and [the prospect of] of reupping Howard Stern (perhaps on different terms)", the analyst said he was maintaining his $1.50 price target on Sirius XM.