Let’s take a look at analysts’ morning notes.
- MORGAN STANLEY: Challenging outlook. ADBE prudently de-risked Q2 for Japan, although visibility on Q2 is lower than usual and ADBE will not likely recover all slipped deals in Japan/ U.S. Fed. With estimates still volatile, and the story still transitioning, we prefer other plays on the strong application cycle like Intuit and Oracle.
- CITI: Only some risk. Japan impact was worse than expected, but now de-risked. Q2 guide of $970 million to $1.020 billion was slightly worse than we expected with Japan, which suggests underlying business is actually healthier than our and street estimates assumed.
- MORGAN STANLEY: Single serve market has big opportunities. Our key assumptions include $775 million in total retail sales of SBUX K Cups in FY12, with some diminished initial flow because of launch and advertising costs.
- CITI: Verizon is building momentum. It remains on track to show stronger wireless revenue growth from rising smartphone penetration during 2011 with a favourable start to the year, while also stabilizing its wireline revenue. We believe Verizon would be a net beneficiary in a consolidating industry structure and Verizon could be a possible buyer of any divested spectrum that could result from AT&T’s pending acquisition of T-Mobile.
HOME DEPOT (HD):
- CITI: Bullish. Management is confident that it can achieve its positive LSD SSS plan in 2011, and we believe upside to comps could be driven by a rebound in the housing market, market share gains and improvement in HD’s Pro business.
- COWEN: Slow recovery. Continued investment in sales and marketing will result in a subdued recovery in EPS growth rates for the next 6-12 months. Regarding PAYX’ high exposure to short term interest rates, every 25 BPTS move in short-term interest rates would have a $3.5 MM after tax effect, or an estimated $0.01 in EPS, for a 12-month period.
JABIL CIRCUIT (JBL):
- JPMORGAN: Delivering in challenging times. It continues to show clear revenue growth and margin improvement strategy as evidenced by its rapidly growing, high-margin Green Point component business. We adjusted down our forecasts on March 18 to reflect the potential impact from both demand and supply chain disruptions from Japan. Jabil gave FQ3 guidance assuming no impact from Japan. Their FQ2 cash flow was very strong.
- BARCLAYS: Improving. Shares of Disney are 7% below their 3/3/11 highs and have lagged the S&P 500 by nearly 400 bps due to a combination of concerns about oil, Japan and a recent studio film release, in our view. However, we remain constructive at current levels given Disney’s late-cyclical upside, attractive growth-adjusted valuation, and progressive digital strategy. Disney remains our top pick for 2011. Digital strategy may help Disney gain relevance on new platforms.
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