Benzinga's Top Downgrades With Color for May 2, 2012
Listed below are today's Top Downgrades at Benzinga:
Dougherty & Company mentioned, "Our NEUTRAL rated stance is predicated on the following: 1) A slower-than-expected start to the new year on the sales front – although management is maintaining full-year sales guidance of 3.5% to 4.5% on an FXneutral basis. 2) Margin pressure which management has said could continue into CY13 (i.e., ERP, R&D initiatives, etc.). 3) With the stock currently trading at ~16.6x on our new CY13 EPS estimate of $6.50 (vs. peer valuation of 15-17x), we believe it's fully-valued at these levels, given the pending headwinds."
Deutsche Bank says, "While we upgraded the stock to Buy just 8 weeks ago, the business mix shifts revealed in the 1Q12 earnings result cause us to revise downward our forward-looking earnings projections in a way that we can no longer maintain our optimistic outlook. Ironically, our skepticism may be ill-timed. Historically, the Bermuda Re/Specialty insurers have shown a remarkable propensity for appreciation and outperformance in the May-November timeframe. We have no reason to believe this year will be different."
Jefferies said, "We are downgrading PFCB to Hold from Buy following the announcement of Centerbridge Partners' proposed acquisition. Based on precedent transactions, we think the valuation of $51.50 per share ($1.1B EV) is fair, and do not expect any other bidders into the deal. We are maintaining our estimate for '12 EPS of $1.52, and raising our price target to $51.50 (fr. $41)."
Wunderlich Securities commented, "Ubiquiti Networks (UBNT) reported solid revenue and gross margin improvement, but aggressive product line and intellectual property rights initiatives are stunting prospects from continued operating margin expansion. Shares closed before the print at our target price. Shares declined by a midsingle-digit percentage after hours. In our view this is still close to being fully valued, since we believe it could be more than one quarter before there is visibility of enough incremental earnings acceleration to justify a meaningful increase in target price."
Sterne Agee said, "The deal with Centerbridge Partners (est. total assets of $20 billion) is valued at $1.1 billion or $51.50/share, a premium of approximately 30% over the average closing share price of PFCB for the 30 days ended April 30, 2012. The transaction is expected to close no later than the end of 3Q12. Alternative offers may be extended for evaluation through May 31, 2012."
Bank of America said, "Despite an upside surprise in 1Q12, we see increased risk of earnings disappointments driven by pricing pressure in Specialty Property. We are now reflecting premium rate reductions in our earnings forecasts for 2013 and 2014, which leads us to lower our 2013 operating EPS estimate from $6.45 to $5.75 and our 2014 estimate from $7.05 to $5.50. We are now well below consensus for both years and anticipate a decline in EPS during the next couple of years."
Miller Tabak said, "PFCB posted weaker-than-expected results in 1Q12 amid its uneven turnaround, but this news was overshadowed by yesterday's takeover news. We do not anticipate a competing bid to yesterday's $51.50 per share offer as PFCB is above our $47 fair value calculation based on a break-even analysis."
Morgan Stanley commented in the report, "We are downgrading RSH and decreasing estimates as we expect further challenges. Pressure from carriers and handset makers is intensifying, depressing earnings, and shares are not cheap at 14x ‘13E EPS. Further downside earnings revisions and a potential dividend cut are likely catalysts."
Bank of America mentioned, "As a stand alone E&P stock benchmarked against large cap US peers, we believe a starting valuation that stands at the upper end of this peer group stretches the boundaries of what can be justified by investors. Critically, a strategy that is anchored on top line growth with a dependent improvement in unit margins is all premised by management on a $120 sustainable Brent oil price deck that we view as ambitious. As a minimum, if we run the same set of commodity assumptions through the other large cap US oils we believe the pace of transition from gas to liquids, available capital for reinvestment or flexibility to for other initiatives (buy backs, etc) stands ahead of COP in almost every case. Should oil prices weaken, our concern is the pace of improvement will slow."
Brean Murray Carret & Co. said, "We are downgrading EQT to Hold because we believe that the company's main 2012 catalyst, the upcoming IPO of an MLP containing its midstream assets, has already been priced into the stock at current levels. Moreover, the delay of the Logansport processing facility into the fourth quarter (from July) defers the ~$1.50/Mcf of incremental liquids pricing uplift we had seen as a second major catalyst for the company."
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