Let’s take a look at analysts’ morning notes.
- UBS: Company is reinventing itself. DYN CEO Bruce Williamson will resign as president and CEO effective March 1 and as Chairman of the Board. Holli Nichols, CFO, will resign with effect on 3/11 as well and has accepted an opportunity at another company. Chuck Cook will replace Holli as interim CFO. All five remaining directors, including chairwoman Hammic, will not stand for reelection at DYN’s annual meeting, likely in June. Icahn’s latest tender offer expired on 2/1; In turn Icahn has terminated the merger agreement. We continue to doubt a higher bid is forthcoming. The company is executing on cost reduction by eliminating 135 positions, mostly at DYN’s corporate office. We see the reductions as decisively positive in light of our projected compression in EBITDA.
CAMPBELL SOUP (CPB):
- CITI: Bearish. F2Q11 was another difficult quarter for CPB as heavy promotional activity in soup continued but failed to generate volume growth. Management expressed much optimism about the soup category but at this time, it is clear that is going to be a “show me” story as the company shifts its marketing mix from trade promotions to brand building/advertising activities. Thus, given the current softness in soup volumes, it remains to be seen how volumes react as promotional activity is reduced and product prices increase.
- MORGAN STANLEY: Underweight. We expect more muted sales growth in F2011; an incentive comp headwind in F2012; a likely greater need to increase spending in F2012 and a more challenging F2012 pricing environment relative to our estimate of 6% inflation. To be clear, we still see our EPS estimates biased to the downside. We also lower our price target from $32 to $31, which assumes that CPB’s dividend yield migrates from 3.5% to 3.75% (the high end of the group) as earnings power and growth potential comes increasingly into question.
CF INDUSTRIES HOLDING (CF):
- BARCLAYS: Strong outlook for 2011. It reported Q4 headline earnings of $2.78/sh. After usual/onet-me items, we estimate operating earnings of $2.65/sh versus our expectations of $2.94/sh. CF reported overall nitrogen sales of 3.35 million tons at an average realised price of $299/t versus our expectation of 2.99 million tons at $328/t for Q4/10. The company realised a lower than expected nitrogen price as some Q4 sales reflected agreements from July/August 2010 (due to the time lag between sales and deliveries) when nitrogen pricing was significantly below current levels. Looking ahead to Q1, with nitrogen pricing rising through the end of 2010 and into the beginning of 2011, we expect CF to realise higher nitrogen prices in Q1/11 over Q4/10.
- DEUTSCHE BANK: Buy. Hosted MSFT management in Europe and came away from the meetings with the continued belief that MSFT stock remains attractive at current levels. Investors’ primary focus was on the mobile and tablet space and while MSFT remains behind competitors in both of these areas, we believe the company is planting the seeds for success longer term. It is interesting that there is a perception that MSFT can’t execute the consumer space, yet the launch of Kinect has been a resounding success with over 8 million units sold in the December quarter.
- MORGAN STANLEY: The buzz is back. Following strong F1Q11 results and Disney’s investor day last week, we reiterate our OW rating and raise our FY11 and FY12 estimates and price target. As laid out in our January 4th report “Led by Parks & ESPN, ’11 Growth Should Accelerate”, DIS is expected to deliver accelerating revenue and EPS growth. We see 15% upside potential to our new target, and see revision bias remaining to the upside with a new bull case of $58 or 30%+ upside.
JANUS CAPITAL GROUP (JNS):
- JPMORGAN: Underweight. New analysis of Schwab’s distribution channels gives us increased confidence that Janus will continue to generate negative or below market organic growth. In particular, Janus funds on Schwab’s fund supermarket Select List have fallen materially, YoY, and fund closures are taking a toll. Poor performance continues into 2011, driving performance fees to be subtractive to revenue for the first time. Furthermore, poor performance is weighing in on fund returns, with the larger funds trailing markets by 150 bps, meaning investors aren’t getting the full impact of strong markets.
- MORGAN STANLEY: See strong upside potential. We are keeping our overweight rating because of persistent favourable supply-demand for rare earth oxides (REOs), steadily lower execution risk, and opportunities to increase margins through downstream integration. Key investment themes: Chinese supply to remain tight, post-IPO execution has increased our confidence in de-risking and downstream integration will improve exposure to high-end markets and could add $14/share.