Stock Picks: Cree, Pilgrim's Pride, Texas Instruments

Wall Street analysts offer buy, sell, or hold opinions on stocks in the news on Sept. 9

Cree: Wunderlich Securities equity analyst Theodore O'Neill reiterated a buy rating and $85 price target on shares of Cree (CREE), a maker of energy-efficient lighting products, on Sept. 9.

"We believe the recent pullback in the share price of [Cree] has presented an attractive entry point for building a position in the stock," O'Neill wrote in a note. He said the shares have come under increasing pressure from investor fears of a cyclical slowdown in the semiconductor industry and high inventory levels of flat-panel monitors and televisions that employ the company's light-emitting diodes (LEDs).

"[T]he percentage of LED-backlit LCD monitors and televisions is about 12 percent, by our estimates, and only a fraction of those use Cree LEDs," the analyst wrote. "If that business were to disappear, we estimate it would impact Cree's [earnings per share] by less than a dime."

The company reported EPS of $1.45 in fiscal 2010 (ended June).

Pilgrim's Pride: Morgan Joseph initiated coverage on shares of Pilgrim's Pride (PPC) with a hold rating on Sept. 9.

Pilgrim's Pride, which operates chicken-processing plants and prepared-food facilities in 12 U.S. states, is 64 percent owned by Brazil-based JBS.

In a note, equity analyst Stephen Share said that with the supply of chicken down 5 percent from its peak in 2007, "we feel the chicken market has recovered and is now set to improve." He noted that chicken prices have increased 23 percent since the company's bankruptcy filing in December 2008 and that he believes chicken prices could continue to appreciate "with even a modest improvement in the economy."

The company exited bankruptcy in December 2009.

Share said that while he is concerned that plans to open three processing facilities through the first quarter of 2012 could hurt a nascent recovery in chicken prices in the short term, "we feel the market can handle this increase in supply, and we doubt 2011 chicken supply will significantly exceed 2007 levels."

"PPC has a lot on its plate for a new management team to handle … [and] with a relatively high debt level, there is little margin for error," the analyst said. "Therefore, we would like to see more operating improvements before recommending the stock."

Texas Instruments: Credit Suisse equity analyst John Pitzer reiterated an outperform rating and $32 price target on shares of Texas Instruments (TXN) on Sept. 9.

In a note, Pitzer said he expects the second-largest U.S. chipmaker to narrow its third-quarter outlook toward the midpoint of its current guidance of $3.55 billion to $3.85 billion in revenue and 64¢ to 74¢ of EPS at the mid-quarter update after the close of trading Sept. 9.

Pitzer said his industry contacts suggest the communications end market has been robust so far this quarter and demand from the company's industrial segment remains "solid," offsetting potential softness in its computing business.

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