Benzinga's Top Upgrades with Color for May 25, 2012
Listed below are today's Top Upgrades at Benzinga:
JP Morgan said, "Eastman shares with LYB, DOW and WLK an exposure to an inexpensive and growing natural gas liquids feedstock supply. We expect Eastman to throw off 13.6% of its share price in free cash flow in 2013: its 2012 free cash flow yield is much lower at 4.2% due to increased working capital needs stemming from the Solutia acquisition. We expect a 16% free cash flow yield for 2014. We believe that these very high sustainable levels of free cash flow generation are likely to justify a higher Eastman share price. Eastman Chemical's share price has decreased (15%) over the previous month (comparable to the decrease in LyondellBasell), versus a 6% decrease in the S&P Index."
J.P. Morgan explained, "We are upgrading ITW from Neutral to Overweight based on our discussions with management at our recently hosted meetings; we met with Scott Santi, Vice Chairman, and John Brooklier, VP of Investor Relations. The meeting was focused on ITW's renewed effort to take the company to the next level of performance without losing any of the differentiated management practices and culture that have made the company a success to this point. Our sense is that the recent activist involvement has spurred management to more closely review its current portfolio as well as some of its decentralized practices with a greater sense of urgency (portfolio review was already underway)."
In the report, Williams Financial Group said, "While the fact that results were below consensus may well pressure SMTC's shares in Friday trading, the quarter actually was fairly strong and actually in-line with Street expectations. The integration of the Gennum acquisition significantly complicated the results and masked the relative underlying health, which also looks to be improving. The adjustment of Gennum's distributor revenue recognition and the accounting for several other items to SMTC's standard reduced Q1 sales by $4.6 million, which if included would have resulted in a modest upside to expectations."
Citigroup said, "We are upgrading CRI to a Buy based on topline growth of 10%+ over the next several years (retail expansion, international, ecommerce) and EBIT margin expansion (cotton tailwind, supply chain restructuring, mix-shift to higher margin retail, ecommerce, int'l) driving double digit (15%-30%) EPS growth. The stock is up 33% YTD but we believe there is more upside in both the short term (driven by cotton tailwind and mix-shift) and long term (driven by EBIT margin expansion to upper teens). Our above consensus 2013 EPS estimate of $3.81 (FC at $3.31) represents just 13.6% EBIT margin vs. CRI's peak of 13.9% in 2010 when CRI had lower penetration of high margin retail, ecommerce, and international."
Deutsche Bank said, "Siemens has been disappointingly accident-prone in recent quarters, with sizeable losses on various contractual disputes. We think that this was partly due to an excessive focus on growth with inadequate focus on risks. We also think that this has been the main cause of the poor share price development and consequent depressed valuation. We see signs that the focus is shifting back towards profitability and are upgrading to Buy with a higher E85 TP."
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