Let’s take a look at analysts’ morning notes.
- DEUTSCHE BANK: Buy. Results were way better than expected across the board. There is more room for margin expansion as the gains were driven by initiatives which are in the early innings.
- CITI: We prefer Home Depot. Despite delivering a strong quarter LOW’s market share was flat versus Home Depot which had share gains. Investments in weekend sales teams and LOW’s PSE position could drive SSS upside. We reiterate our hold rating and prefer buy-rated HD as HD’s investments in merchandising IT, and customer service are driving share gains.
- MORGAN STANLEY: Solid stock. Revenue went down only slightly and was in-line with consensus estimate. We remain equalweight as we like the company’s focus on hotels/international but see somewhat limited upside.
FLOUR CORP (FLR):
- BARCLAYS: Bullish. It reported a messy quarter but we are convinced in the underlying strength of its end markets. The main concern for investors is what appears to be continued downside risk/uncertainty on the project in 2011 and potentially in 2012. We are looking through the project issues and focus on FLR’s improving end markets which should continue to drive backup growth and margin upside.
- DEUTSCHE BANK: Buy. Business trends are strong and accelerating. EBIT margin is poised to DOUBLE over the next three years from under 4% to 8%. Raising price target to $15, reflecting 26% upside.
DOLLAR TREE (DLTR):
- BARCLAYS: Bright outlook. The company will attract new customers to its existing stores and has the potential to double its North American store base, while also growing its e-commerce business and generating free cash flow to fund growth and buy back stock. The stock is undervalued and we maintain our overweight rating.
CARNIVAL CORP (CCL):
- DEUTSCHE BANK: Bullish. Oil prices have led us to adjust our forecasts and price targets for the stock but we are still recommending buy. Trading will continue to be robust, helped by a healthy U.S. consumer and some evidence of strong bookings in Germany and the UK.
- UBS: Wildcard. It has started off with a surprisingly strong 1Q however questions remain regarding the visibility on 2H gross margin improvement, EPS targets and cash usage. CHS has among the highest exposures to China and is a late mover to other countries, which could mean higher costs/operational risk over the next few years.
- DEUTSCHE BANK: Growth potential. Shares are not as expensive as they look when considering the long-term growth potential for both the core concept and emerging opportunities. We’re staying with hold as near-term margin uncertainties will likely weigh on share performance for now. We are maintaining our PT of $250 due to above-average returns, strong cash flow and no debt. Weaker customer traffic given the tough macro conditions present risk as well.
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