Stock Picks: Google, BofA, Shaw Group, NutriSystem

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NutriSystem (NTRI)

Janney Montgomery Scott upgrades to buy from neutral; raises estimates, price target

NutriSystem Inc.'s third quarter results could point the way to improvement in 2010 for the weight loss company, Janney analyst Mitchell Pinheiro said Oct. 16. Pinheiro said profits for NutriSystem may have reached a low point, but its results for September could be a positive sign that will create optimism about the strength of the upcoming New Years' diet season in early 2010.

NutriSystem is scheduled to make its third quarter report on Oct. 27.

In addition to upgrading the shares, Pinheiro boosted his price target on NutriSystem to $24 per share from $16. Pinheiro raised his profit estimate for NutriSystem and said he expects additional growth from a series of new programs, including the NutriSystem D plan, which is targeted at diabetes patients, tie-ins with Schwan's Home Delivery Service and Costco, and a partnership with Wal-Mart Stores Inc. that was announced earlier this month.

The analyst now expects NutriSystem to earn $1.17 per share in 2010, up from $1.03, because he thinks new customer starts will hold steady instead of declining, as they did in 2009, and new customers appear to be staying on their plans for a few weeks longer: he said new customers are staying for an average of 2.25 months, up from 2 months.

Tempur-Pedic International (TPX)

KeyBanc Capital Markets rates buy; raises price target

NutriSystem's third-quarter profit and improving business trends prompted KeyBanc Capital Markets analyst Bradley B. Thomas to raise his price target on shares of the mattress and pillow company on Oct. 16.

After the close of trading Oct. 15, Tempur-Pedic said earnings rose 7% because of higher prices, lower commodity costs and manufacturing improvements.

Sales declined 11% to $224.1 million on weakness in the U.S. and abroad, but the company still raised its earnings and sales outlook for 2009.

Thomas raised his price target to $27 from $23 on improving business trends. "We continue to view Tempur-Pedic as a strong cash flow generator with a solid balance sheet and compelling growth opportunity," Thomas wrote in a client note.

Looking to 2010, Thomas said the company will benefit from a new mattress product and advertising campaign. Thomas said management would not discuss future pricing but believes some prices may rise in early 2010 on some models.

Colfax (CFX)

KeyBanc Capital Markets downgrades to hold from buy

KeyBanc analyst Jeffrey D. Hammond downgraded the stock of Richmond, Va.-based pump and valve maker Colfax on Oct. 16, following recent gains in its stock and little sign of catalysts that might propel the shares higher.

Hammond noted that the shares have staged a solid recovery over the past several months. Since the analyst upgraded the stock on June 26 it has climbed 53%. The broader market, as measured by the Standard & Poor's 500 index, rose 19% over the same time period.

Further, two factors threaten next year's performance: A recent increase in business from power generation companies appears to have peaked; and prospects for new business from boat companies remain uncertain.

"We believe Colfax's current backlog and order momentum (excluding cancellations in commercial marine) should position the company for a solid second half of 2009; however, we would look for greater visibility into 2010 before becoming more constructive," he wrote in a client note.

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