Wednesday, September 13, 2006

Calls of Note Part 6

- Goldman Sachs is out on Federated (NYSE:FD) telling investors to buy the stock ahead of a potentially big beat.

Firm estimates incremental advertising could add at least 50-150 basis points to comps in September. Federated's aggressive advertising campaign was rolled out last week to re-launch its Macy's brand. On September 9th, over 400 stores were converted to the Macy's nameplate from a whole host of regional May department stores. Across these converted doors, the firm estimates that May spent approximately $53 million in advertising in September 2005 - a conservative estimate for the incremental benefit accruing to Federated in the month.

They believe there is upside to management's raised 3Q same store sales guidance of 3-5% (from previous 2-4%) and especially to firm's 3% estimate based on the following. As a result, they see upside to their 3QFY2006E EPS of $0.22, above management's $0.15-$0.20 guidance.
Firm is maintaining otheir $48 one year price target based on their 3-tiered valuation framework (best/worst case, CROCI, DCF) which is equal to 12.8x fiscal 2008E EPS of $3.75.

Notablecalls: Nice conviction, guys! Too bad it's too late. Watch these comments set up a short sell oppy. The stock will shoot up and then the buy-side will cash in their chips. Btw, Mother Merrill was out on retailers late last night saying the sector is overbought.

No comments: