Goldman Sachs (GS) – Bear of the Day
We are downgrading our recommendation on Goldman Sachs (GS) to Underperform from Neutral, based on the effects related to Securities and Exchange Commission (SEC) charges and the negative impact of new financial regulatory reform.Litigation issues not only impact a company's reputation but also dent its financials. Further, the new regulatory reform will continue to pressure trading revenues, which will hurt the profitability of Goldman in the upcoming quarters.
Our six-month target price of $142.00 equates to about 9.5x our earnings estimate for 2010. Combined with the $1.40 per share annual dividend, this price target implies an expected negative total return of 8.5% over that period, which is consistent with our Underperform recommendation.
Zacks Investment Research
Eastman Kodak Co. (EK) – Bear of the Day
Eastman Kodak Company (EK) reported disappointing results for the second quarter of 2010 based on lower prices and higher raw material costs. We believe this will continue in the near future based on a slower market recovery.Thus, we reduced our earnings estimate for the quarter and fiscal year. Moreover, a highly competitive market and Kodak's huge exposure to volatile products pose immense risks. The company also faces integration and other risks related to acquisitions, strategic alliances, joint ventures, divestitures and outsourcing of transactions.
Moreover, a huge dependence on third party manufacturers and external suppliers negates both top-line and bottom-line results. Thus, we reiterate our Underperform rating on the stock.
Zacks Investment Research
Becton, Dickinson (BDX) – Bear of the Day
We are downgrading our recommendation on Becton, Dickinson (BDX) to Underperform. We believe the company's disposable and consumable products remain vulnerable to slowdown in hospital, lab-testing and doctor-visit volumes in the U.S. and Europe.Third-quarter fiscal 2010 earnings of $1.29 per share beat the Zacks Consensus Estimate by $0.04 while falling short of the year-ago earnings. While Becton's focus on safety-engineered products gained momentum in the past (as health-care providers sought to reduce hospital acquired infections), the market is now saturated in the U.S. and slower growth is forecasted for the ex-U.S. markets.
Further, Becton competes with numerous niche players in a multitude of product lines. Our target price of $64 is based on a P/E of 12.6x our fiscal 2010 EPS estimate.
Zacks Investment Research
AMB Property Corp. (AMB) – Bear of the Day
We are changing our long-term recommendation for AMB Property (AMB) to Underperform from Neutral as we anticipate the stock to perform well below the broader market. Fiscal 2010 earnings estimates were reduced by 11 out of 13 analysts covering the stock, while none increased them over the last 30 days.With a decline in commercial real estate fundamentals, demand for AMB's services has decreased comparatively. However, AMB's second quarter 2010 results were in line with the Zacks Consensus estimate.
Our long-term Underperform recommendation on the stock indicates that AMB would perform well below the broader market. Our target price of $24.00 at 19.5X 2010 FFO/Share factors in this view. Over the last five years, AMB s shares have traded in a range of 4.1X to 21.2X trailing 12-month FFO.
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Big 5 Sporting Goods (BGFV) – Bear of the Day
Big 5 Sporting Goods (BGFV) posted a 0.5% decline in same-store sales during the second quarter of 2010, missing its own prediction of low-single digit growth. Consequently, the company slashed its earnings guidance for the second quarter to $0.20 - $0.23 per share from the earlier forecast of $0.24 - $0.30 per share.Big 5 Sporting also encounters intense competition from national chains, mass merchandisers and regional stores, which exerts severe pressure on its profitability. Moreover, the seasonal nature of its business and risks associated with sourcing from foreign countries also undermine the company's future operating performance.
Accordingly, we downgrade our recommendation on Big 5 Sporting Goods to Underperform from Neutral as we anticipate it to perform well below the broader market.
Zacks Investment Research
Quest Diagnostics (DGX) – Bear of the Day
Quest Diagnostics (DGX) second-quarter EPS of $0.89 beats the Zacks Consensus Estimate by a penny and the year-ago quarter s by 7 cents. However, revenues declined 1.4% to $1.9 billion, driven by a decline in both volume and pricing.Meanwhile, the company proactively negotiated contracts with some MCOs at reduced prices. Although this gives more visibility, revenue per requisition was affected in the near term. Quest is adopting strategies such as suitable acquisitions, increased sales force and targeting additional geographies to drive its top line.
However, we believe in the near term volume and pricing outlook will continue to remain under pressure unless the economic scenario improves. As a result, we lower our estimates for the company and downgrade it to Underperform.
Zacks Investment Research
Genomic Heath, Inc. (GHDX) – Bear of the Day
Genomic Health's (GHDX) first quarter 2010 loss of $0.07 per share missed the Zacks Consensus Estimate of a loss of $0.03. Although the company's lead product, Oncotype DX breast cancer test, recorded a year-over-year growth of 20%, revenues declined sequentially.The company is solely dependent on the breast cancer test currently. Moreover, we are concerned about the outcome of the FDA meeting on LDTs, the outcome of which might have a long-term impact on the company.
Other pipeline tests at Genomic have a long way to go before commercialization. Given these factors, we have downgraded the stock to Underperform. We have also lowered our estimates for the second quarter 2010 and fiscal 2011.
Zacks Investment Research
FTI Consulting (FCN) – Bear of the Day
We are downgrading our recommendation on FTI Consulting (FCN) to Underperform from Neutral as the company trimmed its fiscal year 2010 outlook. The revised outlook is due to dramatic deceleration expected in Corporate Finance and Restructuring, less-than expected recovery in Merger and Acquisition activity and the struggling Technology segment.Additionally, progress in its other segments such as Economic Consulting, Strategic Communications and Forensic and Litigation Consulting businesses are slower than expected. Further, the near-term outlook remains cautious as demand environment for practices remains uncertain and seizing up of business in Europe.
Our six-month target price of $31.00 per share equates to about 12.0X our earnings estimate for 2010, implying a negative total return of about 7.8% over that period.
Zacks Investment Research
POSCO – ADR (PKX) – Bear of the Day
POSCO's (PKX) lackluster operating earnings guidance -- due to higher raw material costs and an anticipated increase in Chinese steel volume exports -- for the second half of 2010 continue to generate headwinds.Rising competition will result in significant price competition, declining margins and reductions in revenue. Moreover, concerns over gains/losses from volatility in foreign currency and the cyclical nature of the industry will restrict share price performances.
Thus, we have downgraded our recommendation to Underperform. Our $92.00 target price, 7.8X 2010 EPS, reflects this view.
Zacks Investment Research
Honda Motor Ltd. (HMC) – Bear of the Day
Honda Motor Ltd (HMC) is expanding its business in Asia, growing its global network to increase efficiency and introducing new products to satisfy local markets. However, the economic downturn in the U.S. and Europe continues to negatively affect Honda's operations, especially the Power Products and Other business.Moreover, Honda's global position is threatened by unfavorable currency exchange rates, flat-to-lower sales in its key markets and increased competition. Therefore, we have downgraded our recommendation on the stock from Outperform to Underperform with a target price of $28.
Our long-term Underperform recommendation on the stock indicates that it would perform lower than the overall market. Our $28 target price, 13.7X our 2011 EPS estimate, reflects this view.
Zacks Investment Research