- RSH is taking a beating from the analysts this morning as 3 firms are out lowering their estimates and targets:
Goldman is reducing their estimates on Radio Shack to reflect expectation of ongoing challenges in the wireless business in light of the ongoing transition to Cingular from Verizon as a primary provider, sales shortfalls as RSH transitions from analog to LCD TVs, and margin pressure as RSH clears unproductive inventory. RSH's recovery is likely to be slow and fitful, its longer-term strategic challenges are daunting, and the stock still looks slightly overvalued despite its recent decline. According to the firm, even if the company achieves the high end of its free cash flow guidance of $50-$100 million, a 5% free cash flow yield implies a $14.70 stock price, slightly below current levels. Firm new F06 EPS forecast is $0.70, down from $0.83 previously, while the new F07 forecast is $0.85, vs. $0.95 previously.
Banc of America takes their tgt on RSH to $16 from $18 as their FY2006 EPS goes to $0.88 from $1.25. FIrm believes Q2 will be another tough quarter as the wireless business remains weak and the pace of new contract signups is slow to recoup lost residuals from the VZ/Cingular transition. Maintains Neutral.
JP Morgan calls the issues at RSH the worst kept secrect on Wall Street but notes it's probably too eraly to buy the shares. They met with management last week and came awayfeeling OK.
According to the firm, RSH is either the next Linens 'n Things (taken private at 8.9x LTM EBITDA on 2/14), Circuit City (turnaround under new management) or Sharper Image (which bottomed at 0.10x sales). The latter is extreme. RSH over the past decade has troughed at 0.43x-0.44x sales. With the stock currently at 0.52x LTM sales, the firm remains intrigued, yet sidelined. Even a best-efforts sum of the parts (EV/Sales) indicates that one can be patient. Maintains Neutral.
Notablecalls: The shares have taken a beating and the estimate cuts will likely push the price even lower. Expect to see some more firms lower their estimates in the coming days.
- JP Morgan is upping their 2Q EPS estimates for five of the six major railroads (BNI, UNP, CNI, CSX, NSC) due to stronger than forecast volume trends and greater visibility to operating improvement at several rails. Firm expects strong 2Q reports and their estimates are above consensus. Since the SandP 500 peak on May 5, the six major railroads have fallen 14.0% on average versus a 5.5% decline in the SandP. The rails have also fallen harder than most of the other major transport segments (parcel, truckload, LTL, logistics/asset light).
Prior to the strong rail performance of the past two years, the railroads traded in an average one year forward P/E range of 11x-15x. Following the recent sharp pullback, the rail group is now trading at a one year forward average P/E valuation of 13.7x and a valuation of 12.7x on our 2007 EPS estimates. They believe that current valuation reflects little good news for the railroads. Sees CSX and UNP as the most interesting names.
Notablecalls: Looking at the charts of major railroads I wonder if JP Morgan's valuation call has the power to reverse the downside action. My gut tells me the call will get sold into. Look for 50 day moving average to provide support to the group.
- Bear Stearns says that reflecting recent weakness in notebook demand at major ODMs, they are lowering SYNA estimates and price target from $27 to $24. However, they are maintaining Outperform rating given the potential growth opportunities from new markets (MP3 players, cellphones, etc.) and compelling upside potential if SYNA regains AAPL business. Accordingly, they are lowering FY06 post-options EPS estimate from $0.50 to $0.48, our FY07 EPS from $0.64 to $0.50 and FY08 EPS from $0.92 to $0.76. Target goes to $24 from $27.
Notablecalls: We may see some weakness in SYNA following the call.
- FBR is trimming estimates on NVDA due to inventory accumulation (especially in Europe), the emergence of aggressive pricing, and the prospects of slow business conditions in July, when NVDA will be working to close its quarter. While they believe that NVDA still retains a competitive advantage vs. ATYT, they think this advantage is not enough to escape the presently slow business conditions. As a result, the firm believe s second-half estimates are at risk. Reiterates Underperform and cuts price target to $18 from $23 on lower (below consensus) estimates.
Notablecalls: Not actionable but good to know category.
- Bear Stearns comments on GM after DPH announced a three-way deal with GM and the UAW to offer buyouts to all of the company's UAW employees. Firm notes they continue to expect a broader three-way deal among Delphi, the UAW and GM without an extended strike at GM - view that they believe is nearly uniformly shared by consensus expectations at this point. Firm says they have viewed GM shares primarily as a sentiment trade for much of this year. Six months ago, GM's biggest critics were predicting a Chapter 11 filing during 2006; today, many of those critics are cheering the company's turnaround. The biggest surprise in 2006 for the company arguably has been that, around the edges, the take-rate on UAW buyouts have been better than expected. With sentiment seemingly have turned at this point, and the stock up 33% YTD, their near- to intermediate-term optimism is more muted for the shares.
Notablecalls: GM has been a gap fade play lately. Expect this morning to be no different (in case there is a gap to fade, of course).
Goldman is reducing their estimates on Radio Shack to reflect expectation of ongoing challenges in the wireless business in light of the ongoing transition to Cingular from Verizon as a primary provider, sales shortfalls as RSH transitions from analog to LCD TVs, and margin pressure as RSH clears unproductive inventory. RSH's recovery is likely to be slow and fitful, its longer-term strategic challenges are daunting, and the stock still looks slightly overvalued despite its recent decline. According to the firm, even if the company achieves the high end of its free cash flow guidance of $50-$100 million, a 5% free cash flow yield implies a $14.70 stock price, slightly below current levels. Firm new F06 EPS forecast is $0.70, down from $0.83 previously, while the new F07 forecast is $0.85, vs. $0.95 previously.
Banc of America takes their tgt on RSH to $16 from $18 as their FY2006 EPS goes to $0.88 from $1.25. FIrm believes Q2 will be another tough quarter as the wireless business remains weak and the pace of new contract signups is slow to recoup lost residuals from the VZ/Cingular transition. Maintains Neutral.
JP Morgan calls the issues at RSH the worst kept secrect on Wall Street but notes it's probably too eraly to buy the shares. They met with management last week and came awayfeeling OK.
According to the firm, RSH is either the next Linens 'n Things (taken private at 8.9x LTM EBITDA on 2/14), Circuit City (turnaround under new management) or Sharper Image (which bottomed at 0.10x sales). The latter is extreme. RSH over the past decade has troughed at 0.43x-0.44x sales. With the stock currently at 0.52x LTM sales, the firm remains intrigued, yet sidelined. Even a best-efforts sum of the parts (EV/Sales) indicates that one can be patient. Maintains Neutral.
Notablecalls: The shares have taken a beating and the estimate cuts will likely push the price even lower. Expect to see some more firms lower their estimates in the coming days.
- JP Morgan is upping their 2Q EPS estimates for five of the six major railroads (BNI, UNP, CNI, CSX, NSC) due to stronger than forecast volume trends and greater visibility to operating improvement at several rails. Firm expects strong 2Q reports and their estimates are above consensus. Since the SandP 500 peak on May 5, the six major railroads have fallen 14.0% on average versus a 5.5% decline in the SandP. The rails have also fallen harder than most of the other major transport segments (parcel, truckload, LTL, logistics/asset light).
Prior to the strong rail performance of the past two years, the railroads traded in an average one year forward P/E range of 11x-15x. Following the recent sharp pullback, the rail group is now trading at a one year forward average P/E valuation of 13.7x and a valuation of 12.7x on our 2007 EPS estimates. They believe that current valuation reflects little good news for the railroads. Sees CSX and UNP as the most interesting names.
Notablecalls: Looking at the charts of major railroads I wonder if JP Morgan's valuation call has the power to reverse the downside action. My gut tells me the call will get sold into. Look for 50 day moving average to provide support to the group.
- Bear Stearns says that reflecting recent weakness in notebook demand at major ODMs, they are lowering SYNA estimates and price target from $27 to $24. However, they are maintaining Outperform rating given the potential growth opportunities from new markets (MP3 players, cellphones, etc.) and compelling upside potential if SYNA regains AAPL business. Accordingly, they are lowering FY06 post-options EPS estimate from $0.50 to $0.48, our FY07 EPS from $0.64 to $0.50 and FY08 EPS from $0.92 to $0.76. Target goes to $24 from $27.
Notablecalls: We may see some weakness in SYNA following the call.
- FBR is trimming estimates on NVDA due to inventory accumulation (especially in Europe), the emergence of aggressive pricing, and the prospects of slow business conditions in July, when NVDA will be working to close its quarter. While they believe that NVDA still retains a competitive advantage vs. ATYT, they think this advantage is not enough to escape the presently slow business conditions. As a result, the firm believe s second-half estimates are at risk. Reiterates Underperform and cuts price target to $18 from $23 on lower (below consensus) estimates.
Notablecalls: Not actionable but good to know category.
- Bear Stearns comments on GM after DPH announced a three-way deal with GM and the UAW to offer buyouts to all of the company's UAW employees. Firm notes they continue to expect a broader three-way deal among Delphi, the UAW and GM without an extended strike at GM - view that they believe is nearly uniformly shared by consensus expectations at this point. Firm says they have viewed GM shares primarily as a sentiment trade for much of this year. Six months ago, GM's biggest critics were predicting a Chapter 11 filing during 2006; today, many of those critics are cheering the company's turnaround. The biggest surprise in 2006 for the company arguably has been that, around the edges, the take-rate on UAW buyouts have been better than expected. With sentiment seemingly have turned at this point, and the stock up 33% YTD, their near- to intermediate-term optimism is more muted for the shares.
Notablecalls: GM has been a gap fade play lately. Expect this morning to be no different (in case there is a gap to fade, of course).
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