Stock Picks: Cree, Fastenal, Starbucks

Wall Street analysts offer buy, sell, or hold opinions on stocks in the news on Oct. 12

Cree: Wunderlich Securities equity analyst Theodore O'Neill reiterated a buy rating and $85 price target on shares of Cree (CREE) on Oct. 12.

In a note, O'Neill said he believes a recent pullback in the share price of the maker of energy-efficient lighting products "has presented an attractive entry point for building a position in the stock". He said he believes the shares have come under increasing pressure from fears that white light-emitting diode (LED) lights "are going to rapidly become a commodity".

"We don't believe that will happen any time soon, as there is more art than science in the making of high efficiency long-life LED lighting components," O'Neill said.

Fastenal: Standard & Poor's equity analyst Michael Jaffe reiterated a strong buy opinion on shares of Fastenal (FAST), the largest U.S. retailer of nuts, bolts, and other fasteners, on Oct. 12. He raised a price target on the shares to $74, from $70.

On Oct. 12, the company reported third-quarter earnings per share (EPS) of 51¢, versus the 50¢ average estimate of analysts surveyed by Bloomberg. Revenues were $603.8 million vs. the average estimate of $597.6 million.

On a conference call, the company said it sees operating margins sustained above 30 percent in 2011. The company said it was "fairly optimistic" going into next year, as large manufacturers were seeing "strong" order backlogs in 2011.

In a posting on the S&P MarketScope service, Jaffe said Fastenal's third-quarter EPS was 1¢ above his forecast, on a 23 percent rise in sales and its positive impact on margins. He noted that daily sales to industrial customers "stayed strong," with a 31 percent gain; Jaffe said the 6.3 percent climb in sales to nonresidential construction customers was "especially noteworthy," because that market has been very weak.

On his outlook for ongoing improvement in the company's markets, Jaffe raised EPS estimates for 2010 to $1.84, from $1.82, and for 2011 to $2.30, from $2.20.

Starbucks: Credit Suisse equity analyst Keith Siegner reiterated an outperform rating and $34 price target on shares of Starbucks (SBUX), the world's largest coffee shop chain, on Oct. 12.

In a note, Siegner said recent meetings with management and insights from a Credit Suisse model of earnings before interest and taxes, or EBIT, growth within the company's business segments have increased his confidence in the near-term and long-term potential for Starbucks products sold outside the company's retail outlets.

"We continue to believe SBUX offers the highest growth of the consumer multinationals with relatively minimal capital requirements," the analyst said. He raised EPS estimates for fiscal 2011 (ending September) to $1.45, from $1.44, and for fiscal 2012 to $1.69, from $1.63.

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