From Standard & Poor's Equity ResearchWACHOVIA CUTS FORTUNE BRANDS TO MARKET PERFORM FROM OUTPERFORM
Wachovia analyst Jonathan Feeney says, given Fortune Brands' (FO) new guidance, it looks like sales were slower than he thought, which was "clearly priced in." But he says he did not expect cost pressures from steel and particle board to offset the targeted cost savings and rationalization that was to be the "silver lining" to this slowdown.
Feeney cuts $1.30 second quarter EPS estimate to $1.18 and $4.59 for 2008 to $4.10.
He says FO's balanced portfolio is currently facing pressure from unusually challenging macro pressures (housing, inflation, consumer softness), and while he's still positive on long-term opportunities (premiumization, demographic alignment), he sees little harm in waiting for improved fundamentals.
NEEDHAM UPGRADES NETFLIX TO HOLD FROM UNDERPERFORM
Needham analyst Charlie Wolf says the introduction of more granular data in his Netflix (NFLX) valuation model raises $22 fair value estimate of stock to $25.
He notes, in absence of granular data, he assumed profitability of Netflix subscriber was independent of the length of time he maintained his subscription. He says this materially underestimated the value of the company because the profitability of a subscriber increases with the length of time they maintain a subscription.
He notes after he initiated coverage, Netflix provided considerable granularity on both profitability, churn rate of subscribers as a function of the length of their subscriptions. He maintains $1.30 2008 and $1.75 2009 EPS estimates.
MYRIAD GENETICS REITERATED BUY AT UBS FINANCIAL
Yesterday, Myriad Genetics (MYGN) said it discontinued development of its Flurizan compound. UBS Financial analyst Annabel Samimy says the company indicated minimum savings of $60 million in development costs associated with Flurizan, which she views as conservative.
She says after speaking with management and others close to operations, she adjusts projections for R&D and SG&A spends associated with ongoing business; she raises fiscal year 2009 estimate to $1.47 EPS from $0.05 loss, sees $2.31 EPS in fiscal year 2010. She keeps 60 price target.
However, Samimy thinks a spinoff of therapeutics would be the company's best option to unlock value. She believes a stand-alone molecular diagnostic operations can earn about $2.30 in fiscal year 2009, fully taxed, resulting in value of $75 at a 35 p-e.