Benzinga's Top Downgrades With Color for May 10, 2012

Listed below are today's Top Downgrades at Benzinga:

ISI Group commented, "We are downgrading Staples to Sell from Hold, as the stock has bounced 8% ytd, yet secular fundamentals have not improved, European headwinds remain, and our surveys suggest bullish sentiment is way above normal on consumer discretionary stocks. Our analysis shows that the 2mn white-collar jobs created since the last recession have failed to kick-start office product sales, suggesting that secular headwinds trump cyclical tailwinds. Staples remains the undisputed leader and winner in its space, but with at least 500 too many stores in the industry, margins appear to have more downside than upside in an mCommerce world."

Ladenburg Thalmann commented in the report, "Our prior AMAG rating had been partially justified by expectations for a potential acquisition. In our view the appointment of a CEO indicates the probability of an acquisition in the relatively near term has been reduced significantly. As a standalone company we believe it will take time and good execution for AMAG to create value for shareholders."

Wedbush explained, "The companies have reached a definitive agreement for Bed Bath & Beyond to acquire Cost Plus for $22/share, or $495 million. The boards of both companies unanimously approved the deal, and a special committee of Cost Plus recommended the transaction. Since the acquisition is being made using available cash, the transaction is not subject to financing, and is expected to close during Bed Bath & Beyond's fiscal second quarter."

Bank of America said, "Noah reported 1Q12 results. Non-GAAP net profit amounted to USD3.7mn, much worse than our expectation of USD5-6mn, and declined by 41% YoY as cost remained high (up by 66% YoY) and revenue growth decelerated (up by 11%). Operating margin recovered from 14.5% to 15.7% QoQ, but still lower than >30% level before 4Q11 and less likely to recover soon. Though management maintained its FY12 profit target at USD30-35mn (1Q12 accounted for only 11-12% of the target while 1Q11 accounted for 25% of FY11), we believe it would be a big challenge, and the downside risks have increased due to rising cost and upgraded competition."

JP Morgan commented, "We are downgrading Dolby to Neutral owing to a lack of near-term catalysts and, though somewhat undervalued, we think there are better risk-reward trade-offs elsewhere in our coverage universe. There is no change to estimates, nor change to our price target of $48.00. We are also downgrading near-peer DTSI today, to Underweight based on valuation and lack of catalysts."

Credit Suisse comments, "WES offers investors a best-in-class distribution growth profile. WES' growth is fueled by (1) the dropdown of a large and growing number of midstream assets from Anadarko (APC) and (2) its recent addition of organic growth into the strategy. The addition of organic growth to the platform is a significant step for WES which will further accelerate near-term growth, diversify the company's cash flow stream and improve the sustainability of distribution growth over the long-term. In addition to the company's attractive growth prospects, WES is prudently managed. The majority of WES' cash flow is derived from fee-based activities, and the company maintains a solid balance sheet and relatively high distribution coverage ratio. We are confident WES has the qualities to deliver "top-quartile" distribution growth for the foreseeable future, however our Neutral rating reflects the stock's fair valuation, in our view."

Sterne Agee commented, "We are moving to the sidelines on SGI as the turnaround on the GM front is now a 9-12 month endeavor, far longer than we had anticipated. We do understand that there is a strong valuation case for the stock in the $8-9 level but don't see any immediate catalysts as management works through these lower GM deals and has turned the stock into a classic 2H story."