Stock Picks: AIG, Palm, Wynn Resorts, Fluor

(page 2 of 2)

Wynn Resorts Ltd.: Oppenheimer analyst David Katz reiterated an outperform rating on shares of Wynn Resorts Ltd. (WYNN) on Feb. 26.

Wynn Resorts, the casino company founded by Steve Wynn, reported fourth-quarter earnings on Feb. 25 that missed analysts' estimates after Las Vegas room rates tumbled. Excluding some items, profit of 8 cents a share fell short of the 14-cent average of 12 analysts’ estimates compiled by Bloomberg. The company reported a net loss of $5.22 million, or 4 cents, compared with loss of $159.6 million, or $1.49 a share, a year earlier, which included additional tax costs.

Wynn Resorts' quarterly results were in line with his expectations for weakness in Las Vegas and strength in Macau, Katz said in a Feb. 26. "We maintain our thesis that the Las Vegas Strip will remain pressured over the next 12-24 months, given the inflow of supply from the opening of CityCenter and economic weakness," he wrote.

Despite the unstable environment on the Las Vegas Strip, Katz said he believes that Wynn's exposure to the Macau market provides strong earnings in the present and future growth opportunities. He also said the company's recently completed Hong Kong IPO positions it as "the best capitalized casino company in the industry".

The analyst increased his price target to $74 from $73.

Fluor Corp.: R.W. Baird analyst Andrea Wirth lowered a rating on shares of Fluor Corp. (FLR) to neutral from outperform on Feb. 26.

On Feb. 25, Fluor, the largest publicly traded U.S. construction company, lowered its 2010 earnings forecast. Earnings per share this year will be $2.80 to $3.20, lower than an earlier forecast of $3.20 to $3.60, the company said in its fourth-quarter earnings report. Analysts projected $3.42, the average of 18 estimates in a Bloomberg survey.

Wirth said in a Feb. 26 note that the company's fourth-quarter earnings per share of 82 cents compared with her estimate of 92 cents and the 88 cents consensus estimate of Wall Street analysts, noting lower profitability vs. her expectations. Wirth noted that the company's backlog declined 4.5% sequentially, below management's expectations for "meaningful reacceleration". Wirth said Fluor cut 2010 EPS guidance by 12% at the midpoint to $2.80 to $3.20, vs the $3.46 Wall Street consensus view.

Wirth said Fluor's margins are also expected to be negatively impacted as the company continues to thrive in the lower-margin mining sector, but will continue to see declining revenue in the relatively higher-margin oil and gas sector.

The analyst cut her price target on the shares to $47 from $59.

Business Exchange

Track and share business topics across the Web.