Thursday, June 24, 2010

Stock Picks: Jabil, Red Hat, RIM, Zions

Jabil Circuit: Needham & Co. equity analyst Sean Hannan maintained a buy rating on shares of Jabil Circuit (JBL) on June 23. He raised his price target on the shares to $23 from $21.
On June 22, the St. Petersburg (Fla.) electronics manufacturer reported third-quarter profit, excluding some items, of 40¢ a share, beating the average analyst estimate of 34¢ a share in a Bloomberg survey.
In a note, Hannan said the company's third-quarter revenue of $3.46 billion and non-GAAP earnings per share (EPS) of 40¢ easily beat his respective estimates of $3.15 billion and 33¢. He said the results reflected "strong" quarter-over-quarter improvements of 23 percent in the mobility segment and 21 percent in networking, with most other business segments up double digits.
Hannan said component shortages continue to have a "slight negative impact" on revenue but are "generally manageable." He said the company's Europe business is "steady."
The analyst raised EPS estimates for the fourth quarter to 47¢ from 39¢, for fiscal 2010 (ending August) to $1.49 from $1.33, and for fiscal 2011 to $1.78 from $1.52.
Red Hat: Standard & Poor's equity analyst Jim Yin reiterated a strong sell rating and $25 price target on shares of Red Hat (RHT) on June 23.
In a posting on the S&P MarketScope service, Yin said the company's fiscal first-quarter EPS of 12¢, posted after the close of trading on June 22, was below his estimate of 13¢. Yin noted that revenue rose 20 percent, to $209 million, $6 million above his forecast, as Red Hat saw strong demand across all geographical regions.
"We believe the company is benefitting from pent-up demand and a server upgrade cycle," Yin wrote. He noted that deferred revenue rose "only" 10 percent year-over-year and declined from the preceding quarter, due to weakness in the euro. Yin said he sees revenue growth "decelerating to [a percentage rate in] the low teens" by the end of fiscal 2011 (ending February).
The analyst lowered a fiscal 2011 EPS estimate to 51¢ from 52¢ based on his expectation of higher sales compensation.
Research In Motion: Kaufman Bros. equity analyst Shaw Wu reiterated a buy rating and $93 price target on shares of Research in Motion (RIMM) on June 23.
In a note, Wu said RIM is due to report its May quarter results after the close of trading on June 24. He said he anticipates the company will post results "toward the midpoint" of its guidance range of $4.25 billion to $4.45 billion in revenue and $1.31 to $1.38 in EPS, "meaning it will likely meet or slightly miss" consensus estimates of $4.35 billion and $1.34.
"We are picking up continued momentum in international markets driven by the Curve 8520 and Bold 9700," Wu wrote. He said trends in North America are mixed, with "excitement around the new Bold 9650 and Pearl 3G offset by strong launches of iPhone 4 and HTC Android models."
"With a lot of bad news priced into shares, expectations are low, and we anticipate 'good enough' results, with RIM likely to set a new quarterly record for BlackBerry shipments," Wu said.
Zions Bancorp.: Keefe, Bruyette & Woods equity analyst Brian Klock kept a market perform rating on shares of Zions Bancorp. (ZION) on June 23. He raised a price target on the shares to $27 from $25.
The Salt Lake City lender said in a June 21 filing that it raised $615 million of Tier 1 capital in the second quarter, after announcing May 19 that it was targeting an increase of $600 million. The company's ratio of Tier 1 to risk-weighted assets was up 139 basis points, to 12.58 percent, on a pro forma basis vs. a ratio of 11.2 percent at the end of the first quarter. A basis point is one 100th of a percentage point.
In a brief note, Klock said he was lowering his 2010 loss per share estimate to a loss of $1.48 per share, from a loss of $1.25, and reducing a 2011 EPS estimate to $1.15, from $1.35, due to the company's capital actions in the second quarter and expectations of a lower net interest margin.
He said he raised the price target "given the less dilutive capital raise impact on normalized EPS."

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