Stock Picks: Caterpillar, Expedia, Nike

Wall Street analysts offer buy, sell, or hold opinions on stocks in the news on Sept. 24

Caterpillar: Credit Suisse equity analyst Jamie Cook reiterated an outperform rating on shares of Caterpillar (CAT) on Sept. 24. He raised a target price on the shares to $95 from $85.

In a note, Cook said a survey of Caterpillar dealers showed they were "more constructive" on the sales outlook than in the second quarter. He said the commodities and public infrastructure markets were areas of particular strength.

Cook said order backlog for large equipment is building for Caterpillar, with a "healthy visibility" into 2011. He said dealer inventory levels remain "exceptionally low," a favorable sign for 2011 sales. He expects sales to rise 10 percent to 15 percent in 2010, with sales forecast to rise "at least 20 percent" in 2011.

The analyst raised earnings per share (EPS) estimates for 2010 to $3.95, from $3.50, for 2011 to $5.55, from $4.75, and for 2012 to $7.00, from $6.25, based on his expectation of increased sales strength in the U.S. and continued momentum in emerging markets.

Expedia: Soleil Securities analyst Jake Fuller maintained a buy rating and $33 price target on shares of online travel-services company Expedia (EXPE) on Sept. 24.

In a note, Fuller said his checks with industry sources show that "momentum continues to build" in Expedia's U.S. business. "With July-August [booking] volume tracking well ahead of target, we see upward pressure on 3Q estimates," the analyst said.

"More importantly, we continue to see the stock as attractive," with the potential for a higher price-to-earnings ratio, Fuller said. "EXPE is rebuilding momentum and gaining [market] share, which should work to stimulate sentiment."

Nike: Capstone Investments equity analyst Claire Gallacher reiterated a hold rating on shares of Nike (NKE) on Sept. 24.

On Sept. 23, Nike, the world's largest maker of athletic shoes, reported first-quarter profit that surpassed some analyst estimates as sales in North America continued to rebound on a growing apparel business. Nike sales in North America contributed $1.9 billion to the total in the three months through August.

Net income rose 8.9 percent, to $559 million, or $1.14 a share, in the quarter, the company said. Profit per share was expected to be $1, according to the average of 16 analyst estimates compiled by Bloomberg.

Nike's per-share profit from continuing operations has beaten the average analyst estimate for 17 straight quarters, according to Bloomberg data. Sales in North America are recovering from a decline during the recession.

Nike reported orders for China surged 25 percent, outpacing all other regions on demand for basketball-related sportswear. Total orders for athletic shoes and clothes for delivery from September to January grew 10 percent, to $7.1 billion, the Beaverton (Ore.) company said in its earnings statement. The growth in China compares with 15 percent in North America and declines of 7 percent in Western Europe and 8 percent in Japan.

China accounted for $460 million of the Nike brand's sales in the company's fiscal first quarter, or about 9 percent of total revenue.

Nike rose as much as 5.4 percent, to $81.88, in after-hours trading in New York on Sept. 23.

In a note, Gallacher said Nike reported a "solid" first quarter, with better-than-expected gross margins driving the EPS increase. She said Nike's increase in first-quarter revenue of 8 percent, to $5.175 billion, was "a bit light" of her $5.257 billion estimate.

She noted that Nike reported an 85-basis-point rise in gross margins, to 47.0 percent. (A basis point is one one hundredth of a percentage point.) "Pressure from rising input costs are projected to dampen profitability beginning in Q2 and extend[ing] through Q4," she said.

The analyst lowered an EPS estimate for fiscal 2011 (ending May) to $4.21, from $4.22, and raised a forecast for fiscal 2012 to $4.78, from $4.73.

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