Let’s take a look at analysts’ morning notes.
DIAMOND FOODS (DMND):
- BARCLAYS: Smart move with Pringles outlook. After this transformative deal, nearly 60% of the combined company’s sales and profit will come from the more international yet slower-growing Pringles brand. Despite the admittedly ambitious nature of this undertaking, the combination does make sense to us through both financial and strategic lenses.
ABERCROMBIE & FITCH (ANF):
- WELLS FARGO: Bullish. It remains one of our favourite ideas with strong brand momentum and growth over the next several years trading at a significant discount to peers with comparable growth rates. Over the next several years, we expect ANF to grow its high-margin international business while its mature domestic stabilizes.
- CITI: Focus shifts to growth. ANF outlined a target of $1.25 billion in sales from international A&F stores and $1.5 billion for international Hollister stores with 185 stores. That assumes deceleration in sales per store trends.
KB HOME (KBH):
- WELLS FARGO: Weak quarter. Excluding impairments all operating metrics in the quarter were below our estimates. Gross margins declined and orders were also weaker than expected. KBH attributed the majority of the sequential gross margin decline to lower volumes, suggesting that a pick-up in closings should translate into higher gross margins.
- DEUTSCHE BANK: Earnings prove less resilient in Q1. While order growth in 1Q was less than forecasted, KB reported a positive result for March and forecasted a year/year increase in order volumes for 2011. Maintain hold given strategic differences to peers.
CIT GROUP (CIT):
- BARCLAYS: Downgrade. We are lowering our rating as the growth in book value from core earnings and accretion of fresh start accounting discounts appears to be delayed from this year into 2012 and beyond. We also believe the stock is due for a rest and could trade in the low 40s for the near term until management can demonstrate that core earnings are positive and growing steadily.
- BARCLAYS: Lowering our estimates for the next several quarters. Coach operates 171 locations in Japan accounting for roughly 20% of sales. While well under 10% of the store base is located in the most severely affected regions, we believe sales across much of the country have been significantly affected in the weeks following the earthquake, though recent comments by other apparel and accessory companies have indicated a partial rebound.
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