Thursday, May 28, 2009

Analyst actions 05/28/09

From briefing.com:

"BMO Capital Markets initiates Gap (GPS 17.27) with an Outperform and sets a $21 tgt, based on inventories that are now very tight and positioned to grow with improvements in traffic. Costs have been trimmed significantly, as well, leaving the expense structure lean and poised to leverage faster when sales rebound...

AlphaNinja - I like the Gap, think it's worth $24-25, but in this range-bound market I will wait for a possible pullback. As a wise investor once said, "opportunities are made up easier than losses."

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Also from briefing.com:

"BMO Capital Markets initiates Aeropostale (ARO 34.34) with an Outperform and sets a $50 tgt, based on stronger sell throughs as evidenced by the BMO Sale Rack Index and higher average unit retails, which they expect to result in substantial operating leverage, opportunity for continued competitive market shares gains, driven by a fashion merchandise assortment with pre-planned promotions relative to peers struggling to get the value/fashion equation right, and opportunity for further operating margin expansion by way of systems improvements..."

The stock is inexpensive, but watch out for technicals and profit-taking on this one....

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AlphaNinja - Caterpillar(CAT) downgraded to sell by UBS(along with PH and ETN). Earnings coming in at 1.17 and 1.50 the next two years, down from 5.66 in 2008. The huge reduction is largely b/c CAT can't (and shouldn't) slash costs as quickly as sales are diving. But the company's "normalized" earnings are not going back up to the $5 range anytime soon. And they have $34billion in debt with a $20billion market cap. Lot's of downside here.

briefing.com summary:

"Machinery stocks downgrade details
UBS says they believe the risk/reward profile for Machinery stocks has deteriorated. The firm sees risks from continued weakness in key end markets, given a customer base that is feeling the impact of the credit crunch, limited pricing power from recent industry capacity expansions and increased availability of used equipment, share prices above historic valuation parameters and unfavorable seasonality for machinery stocks. The firm downgraded Caterpillar (CAT), Parker Hannifin (PH) and Eaton (ETN) to Sell from Neutral, and Illinois Tool (ITW) to Neutral from Buy. They are placing Terex (TEX) under review. They continue to favor Joy Global (JOYG) given its strong market position (essentially in a duopoly) and potentially more stable aftermarket exposure (60% of revenues). Additionally, they continue to rate CMI, HEES and URI as Buys."

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