Let’s take a look at analysts’ morning notes.
- UBS: Improved stock. SunPower’s 4Q10 sales and EPS were $937 million and $1.36 versus consensus estimates of $933 million and $1.06. Its strong results were due to its ability to execute and monetise 80+ megawatt utility scale pipeline in Italy. Sunpower’s manufacturing cost for 4Q10 was $1.7/W and ASPs for the R&C business were up quarter over quarter. A possible catalyst for the stock could be Italy’s Fit policy proposal likely in early March including changes to the FiT for 1MW+ ground mount projects.
- BARCLAYS: Solid stock. Q4 results were above consensus but more importantly Q1/2011 outlook was revised upwards (buy-side was expecting management to maintain 2011 outlook). Although the beat was driven by Italy, the raise was largely due to improved demand outlook in North America, in our view. Longer term, SunPower remains well positioned in existing U.S. market and conference call comments suggest that Italian market exposure may not be that large. Shares may be trading at a modest premium to Chinese peers, but trade at a discount excluding the pipeline value.
- CITI: Tough to justify more than hold. With the stock likely to trade up on slightly better 2011 outlook, we find little value here expect the project pipeline. Hold-rated SPWRA is trading >20x GAAP EPS and wasn’t close to earning its cost of capital in 2010, a very strong year.
WEIGHT WATCHERS (WTW):
- MORGAN STANLEY: Great earnings. Raising EPS and upgrade to equalweight on improved attendance. Given Q4 upside and guidance, we are raising our 2011 EPS by 38%. We expect very strong EPS growth (around 49%) in 2011 but we expect EPS growth to decelerate to a more sustainable low-teens rate after 2011 as program benefits dissipate, which makes peer-leading valuation on 2012 EPS reasonable, in our view.
RED ROBIN GOURMET BURGERS (RRGB):
- MORGAN STANLEY: Moving in the right direction. Along with slightly better-than-expected 4Q earnings, management unveiled its promised turnaround plan (codenamed Project RED) featuring amped up loyalty, a refocusing on bar business (questionable in our minds), a recommitment to TV ads and the LTO strategy, up to $18 million in annualized cost cuts and more productive uses of free cash, including an unexpected buyback program. While the benefits of Project RED remain unproven, management is clearly focused on driving incremental sales and margins as soon as 1Q.
DR.PEPPER SNAPPLE GROUP (DPS):
- BARCLAYS: Recovering. Overall we found results this quarter to be largely in line to slightly above expectations, while the forward looking guidance was certainly better than most on the Street had expected. From here, DPS must now demonstrate that it can execute. We remain a bit sceptical that revenue growth at the high end of the guidance range is attainable, but 3%-4% top-line should deliver ample EPS growth in 2011.
- DEUTSCHE BANK: Buy. Despite the sluggish U.S. consumer and LRB category, we remain encouraged by DPS’ focus on investing behind growth and penetration opportunities for the brands, as the key long-term value driver. It is reflected in steady volume growth, balanced across brands and bottling territories.
J.M. SMUCKER COMPANY (SJM):
- BARCLAYS: Company can leverage itself. Against low expectations and a trough valuation, SJM reported an operating EPS beat in its F3Q, with among the most solid top-line results we’ve seen this earnings season. So, it makes sense to us to see the stock outperform on this morning’s news. Still we get the sense that investors are wondering why the stock isn’t up more. In our view, its the prospect of SJM beginning to bear the full brunt of a more sustained coffee spike that is likely putting a lid on the potential multiple expansion.
- CITI: Coffee is pumping this stock. Smucker reported a great F3Q11 quarter which was way above our estimate and consensus. Critically, we were surprised that U.S. Retail Coffee volumes only declined 2pp in the face of significantly higher coffee prices. The reported volume was drastically better than the retail takeaway data we viewed for the 12 weeks ended 1/22/11 and gives credence to the fact that consumers are heavily buying in alternative channels.
TIMBERLAND CO (TBL):
- CITI: Good momentum. In our view, TBL has a solid 4Q on: stabilisation in global classics business (returned to positive growth), broad-based healthy growth in geographies/product.channels with impressive growth +26.7% and increased certainty/visibility on product cost/gross margin impact. We raise 2011 EPS to $2.50 from $1.75 on higher sales/GM and new 2012 EPS = $2.90 on growth from a higher base yielding a new target $38 from $27.
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