Stock Picks: Alcoa, Adobe, Broadcom, Zumiez

Plus Wall Street analyst opinions on ScanSource and Gardner Denver

Alcoa (AA)

Citigroup maintains buy; raises estimates, price target

Citigroup analyst Brian Yu said on Oct. 8 that Alcoa's third-quarter operating earnings of 4 cent per share, reported after the close of trading Oct. 7, topped both his 10 cents loss per share estimate and the 9 cents loss per share consensus forecast of Wall Street analysts.

Yu noted that upside to his estimate came from accelerated overhead procurement cost reductions and an income tax benefit. He continues to anticipate a profit in the fourth quarter as better third-quarter aluminum pricing flows to the company's Alumina business, and cost-cut initiatives advance. The analyst noted that this will be somewhat offset by a seasonal slowdown in the Flat-Rolled and Engineered units.

Yu raised his 2010 earnings estimate from 24 cents per share to 48 cents, and his 2011 earnings view from 60 cents to 80 cents. He boosted his $14 price target to $17.

Adobe Systems (ADBE)

Robert W. Baird upgrades to outperform from neutral; raises price target

Predicting an earnings recovery in the second half of next year and following an upbeat analyst meeting, Robert W. Baird analyst Steven M. Ashley upgraded Adobe Systems on Oct. 8 and boosted his target price on Adobe's shares to $40 from $35. He expects the software maker's earnings to recover thanks to the release of Creative Suite 5 next year.

The Creative Suite software package brings in the bulk of Adobe's revenue. Aimed at professional designers and developers, it includes Photoshop, Flash and Web design software Dreamweaver, among other applications. The most recent version was launched last fall, in the midst of the economic turmoil that dampened demand for it. Analysts generally expect this pent-up demand to drive sales of Creative Suite 5 higher.

Ashley also expects Adobe's acquisition of Omniture Inc. to close as expected and provide a longtime benefit to the San Jose, Calif.-based company.

Broadcom (BRCM)

Robert W. Baird downgrades to neutral from outperform

Saying the fourth could be the "last quarter of good news," Robert W. Baird analyst Tristan Gerra downgraded shares of chip maker Broadcom on Oct. 8. Noting that Broadcom's shares are up 76% year-to-date, Gerra said the stock is trading at a high value compared with similar companies. He kept his target price at $30.

Gerra said he does not believe that the current order strength Broadcom is seeing is sustainable relative to demand and to softness among U.S. telecom carriers.

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