Markets & Finance

Analyst Actions: Chico's FAS, Blue Nile, Acco Brands, W-H Energy Services


Opinions from Wall Street on some stocks Friday

From Standard & Poor's Equity ResearchTHOMAS WEISEL CUTS CHICO'S FAS TO UNDERPERFORM FROM PEER PERFORM

Chico's FAS (CHS) posts 8.3% lower September same-store sales, 7.3% total sales rise. Thomas Weisel analyst Liz Dunn says the softlines retailing group has been pressured by macro concerns, but women's is being hit harder. She believes there is a lack of compelling fashion throughout the entire group, and companies, including Chico's, have been pushing for market share at expense of profitability.

Dunn has less conviction that the group is due for a rally after September retail sales results; September misses were massive. Inventory in marketplace is heavy and the environment will likely remain promotional. If the group does rally, she does not believe Chico's will participate as much as others.

She cuts $0.19 third quarter EPS view to $0.17, $0.83 fiscal year 2008 (January) to $0.80, $0.97 fiscal year 2009 to $0.95. Dunn cuts $14 price target to $13.

CITIGROUP CUTS BLUE NILE TO SELL FROM HOLD

Citigroup analyst Mark Mahaney downgraded Blue Nile (NILE) on his belief that near-term market expectations have gotten ahead of fundamentals. Proprietary Web Traffic Conversion Tracking suggests third quarter units could be 30,000-34,000 vs. his 35,000 estimate. He notes he has very limited visibility into average order size, but sensitivity analysis indicates in-line revenue quarter at best; He thinks the Street's $0.16 EPS is intact.

Mahaney says his $88 target remains based on U.S. specialty retailer average 3.7% 2008 free cash flow yield, which implies 10% downside from current price levels (pre-open). He notes that Blue Nile shares are up 19% since its major second quarter beat, implying expectations for another very strong quarter. He keeps $0.99 2007, $1.35 2008 EPS estimates.

SUN TRUST ROBINSON HUMPHREY DOWNGRADES ACCO BRANDS

Acco Brands (ABD) said it sees third quarter sales falling. ST Robinson Humphrey analyst William Chappell downgrades the stock after ABD said it would not meet expectations for the remainder of 2007. Although ABD's lowered third quarter sales estimate is not a big difference from his $505 million forecast, ABD indicated that it saw double-digit drop off in sales in September due to inventory reductions at key customers, poor consumer demand.

Chappell says the trend is expected to continue for the near term as the company lowered its EBITDA target to $215-$225 million. He believes this announcement, and the fact that the company has only met Street estimates once in the past six quarters, creates a significant credibility concern which could take several quarters to resolve. He cuts $1.38 2007 EPS estimate to $1.25, and $1.91 for 2008 to $1.65.

CREDIT SUISSE CUTS ESTIMATES FOR W-H ENERGY SERVICES

W-H Energy Services (WHQ) shares fell after the company cut its third quarter earnings forecast. Creidt Suisse analyst Kenneth Sill says coiled tubing and weak Gulf of Mexico (GoM) rig count share the blame for third quarter shortfall. He says about $0.10 of the miss was due to lower utilization, negative mix shift in coiled tubing, which had its best ever month in June.

Importantly, pricing was not the culprit, although pricing concerns remain given capacity expansion in the industry. The balance of the miss can be explained by weakness in GoM. The GoM rig count is at levels not seen since the early 1990s, and only a modest recovery is expected in the fourth quarter.

Sill cuts $1.28 third quarter EPS view to $1.08, $5.03 for 2007 to $4.68, $5.62 for 2008 to $5.15. He cuts his price target to $71 from $78. He keeps outperform opinion on the stock.


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