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From Standard & Poor's Equity ResearchFRIEDMAN BILLINGS DOWNGRADES KENEXA TO MARKET PERFORM FROM OUTPERFORM
Friedman Billings analyst David Hilal say he sees greater uncertainty in the software sector in the second half of 2008 and early 2009. He says his analysis suggests that over the next two quarters there is greater risk to the downside to current estimates versus upside.
Hilal believes that IT budget cuts and lengthening sales cycles could result in reduction in software spending, and the Street's estimates have yet to reflect this additional uncertainty. He notes that human capital management software is the lowest priority among IT decision makers in his proprietary spending survey.
He says he's increasingly cautious on growth prospects of Kenexa's (KNXA) employment process outsourcing (EPO) business. He sees $1.53 2008 EPS and $1.78 for 2009. He keeps $25 price target on the stock.
WACHOVIA DOWNGRADES CERADYNE TO UNDERPERFORM FROM MARKET PERFORM
Wachovia analyst Gary Liebowitz says he's increasingly cautious on the near-term EPS outlook for Ceradyne (CRDN). He notes that CRDN's much-anticipated contract for body armor with the U.S. Army, already delayed by about one year from its original target award date, could be delayed again as the Government Accountability Office reviews a protest submitted by one of CRDN's competitors.
Also, he believes there are risks to CRDN's assumptions of a 60% market share and 20,000 sets-per-month total customer demand. Furthermore, he says the operating EPS dilution from the recently-closed SemEquip acquisition is substantial.
He cuts $4.80 2008 EPS estimate to $4.70 and $4.80 for 2009 to $4.55. He has a $40-$45/share valuation range.