Stock Picks: Cisco, CVS, Whole Foods

Plus Wall Street analyst opinions on Medtronic and Sanmina-SCI

Cisco Systems (CSCO)

UBS Securities maintains neutral; raises estimates, price target

UBS analyst Nikos Theodosopoulos said on Nov. 5 that Cisco's first-quarter results, released after the close of trading Nov. 4, beat expectations across the board. He noted that the company's book-to-bill ratio was above 1. U.S. enterprise orders were up sharply (+10%). Public sector orders were strong due to seasonality and broad government spending strength.

"We believe Cisco is likely to remain aggressive on the acquisition/partnership front," wrote Theodosopoulos in a note to investors, noting that the company recently announced over $6 billion in merger deals and a new cloud computing focused joint venture with EMC and VMware.

Theodosopoulos raised estimates on Cisco based on broadly improving fundamentals and Cisco's strong quarterly results: for fiscal 2010, he raised his sales estimate to $38.2 billion and his earnings per share (excluding options) view to $1.45, and for fiscal 2011, he raised his respective forecasts to $43.1 billion and $1.63. He also raised his price target to $25.

CVS Caremark (CVS)

Wells Fargo keeps outperform

Wells Fargo analyst Matt Perry believes the negative CVS share price reaction on Nov. 5 was due to obvious disappointment in the company's 2010 outlook, but also due to broader questions about CVS's integrated retail pharmacy and pharmacy benefit management (PBM) model. He noted that since the merger with Caremark, the PBM segment underperformed its peers dramatically. Perry said CVS continues to lose PBM contracts to Medco and other industry players.

Perry thought the Nov. 5 sell-off in CVS shares was an overreaction. He does not expect the shares to recover quickly, but kept his outperform rating based on long-term value of its retail franchise and a "call option" on stabilizing or improving PBM performance in 2011.

Whole Foods Market (WFMI)

Standard & Poor's Equity Research reiterates sell

S&P equity analyst Joseph Agnese said on Nov. 5 that Whole Foods' September-quarter operating earnings per share (EPS) of 20 cents, vs. 14 cents operating EPS one year earlier, was 3 cents above his expectations. Results benefited as pre-opening and relocation and general and administrative costs were "significantly lower than we expected", despite a 2.3% decline in identical store sales growth.

Agnese continues to believe identical store sales will be pressured as consumers trade down in an adverse economic environment, and by intensifying pricing competition. As a result, he kept his fiscal 2010 EPS estimate of $1.00 and his 12-month target price of $27.

Business Exchange

Track and share business topics across the Web.