Plus: Analyst opinions on Guitar Center, ValueClick, and more
From Standard & Poor's Equity ResearchWal-Mart Stores (WMT)
Cuts to 4 STARS (buy) from 5 STARS (strong buy)
Analyst: Joseph Agnese
October comp-store sales rose 0.5%, in line with Wal-Mart Stores's preannouncement. The company's Nov. guidance of flat comp-store sales is below our forecast of 2.5% growth. We think intermediate-term results will continue to be pressured by increased retail food competition, over-aggressive expansion of high-end apparel merchandise, disruptions from remodeling efforts and difficult comparisons. Our fiscal year 2007 (ending Jan.) and fiscal year 2008 earnings per share (EPS) estimates fall by $0.04 and $0.10, to $2.88 and $3.20, respectively. Our 12-month target price falls by $4 to $55.
Cooper Tire & Rubber (CTB)
Cuts to 2 STARS (sell) from 3 STARS (hold)
Analyst: Efraim Levy, CFA
Our downgrade is based on valuation, following recent rise in the share price. On Nov. 8, we expect the company to report a third quarter loss from continuing operations of $0.09 vs. loss of $0.02. We believe improved operating efficiencies and greater contributions from Asia will be overshadowed by current weakness in U.S. demand and the prospect for continued raw material and energy cost increases. We are maintaining our full-year 2006 EPS estimate of a loss of $0.47. Our 12-month target price remains $10.
CACI International (CAI)
Cuts to 3 STARS (hold) from 4 STARS (buy)
Analyst: Dylan Cathers
Our downgrade is based on valuation as the share price approaches our target price of $60, based on a P/E-to-growth ratio of 0.85 times, using our calendar 2007 EPS of $3.49 and estimated three-year growth rate of 20%. CAI posts September quarter EPS of $0.60 vs. $0.62, $0.03 ahead of our estimate. We expect revenue growth of 16% in fiscal year 2007 (ending June), reflecting contributions from recent acquisitions and continued contract wins. However, our fiscal year 2007 EPS estimate stays at $3.00 on our expectation of a higher tax rate, increased interest expense, and possible margin pressure from hiring difficulties.
Apollo Group (APOL)
Reiterates 2 STARS (sell)
Analyst: Michael Jaffe
Apollo's operating performance has slackened greatly over the past two years. Enrollment growth has fallen sequentially for eight straight quarters to 5.3% in the August quarter of fiscal 2006 (ended August) from 27.7% in the same period in fiscal 2004. We attribute this to changing demographics, more competition, and greater regulatory scrutiny. Since we do not expect any major revival of Apollo's growth in coming years, we are revising our discounted cash-flow model and are reducing growth forecasts to 3%-4% over the next 20 years. Based on a blend of our DCF and relative p-e analyses, we are cutting our target price $3 to $32.
Guitar Center (GTRC)
Downgrades to 4 STARS (buy) from 5 STARS (strong buy)
Analyst: Michael Souers
Before one-time items, third-quarter EPS of 34 cents vs. 51 cents one year earlier, is in line with our recently reduced estimate. While we think exclusive promotional items will lead to a rather strong fourth quarter from a comparable-store sales viewpoint, we are concerned that slowing demand for guitars will cause margins in 2007 to widen less than we previously projected. Our 2006 EPS estimate remains $2.59 but 2007's falls to $2.98 from $3.05. We are also lowering our target price by $1 to $51. After a recent price rise, and with less potential upside seen to our target price, we lower our opinion to buy.
Reiterates 4 STARS (buy)
Analyst: Scott Kessler
ValueClick posts third quarter EPS of 17 cents, vs. 13 cents one year earlier, 3 cents above our estimate. Revenues rose 69%, besting our forecast of 65%, reflecting strength in media and comparison-shopping offerings. The company indicated the technology business also showed improvement, reflecting more stable pricing. We are raising our 2006 EPS estimate to 59 cents from 56 cents but leaving our 2007 forecast at 81 cents. Based on revised peer and discounted cash-flow analyses, we are raising our 12-month target price to $23 from $22. We continue to believe that ValueClick is a good way to participate in the growth of Internet advertising.