Thursday, June 22, 2006

Calls of Note Part 4

- Baird reduces their price tgt on Hutchinson Technology (NASDAQ:HTCH) to $24 from $29 based on 13x C07E EPS and 4x EV/C07E EBITDA, a more reasonable valuation they feel in light of current industry weakness, increasing inventories, and the possibility of a challenging quarter (per industry contacts).

Maintains Neutral rating as the firm believes HTCH enjoys a solid industry leadership position, and has significantly higher earnings power in the model if the company can ramp gross margins to historic levels of 28% or more (current GM guidance is for 19-21%).

Notablecalls: Would not be surprised to see some weakness following Baird's call and weakness in XRTX.

- First Albany reits their Strong Buy rating on PainCare Holdings (AMEX:PRZ) following results. According to the firm the co reported strong 1Q:06 results, suggesting that business trends continue to be robust, notwithstanding recent non-cash accounting restatements.

Given current market conditions, they are making no change to their $3.00 price target at this time, as it implies 75% upside potential from current trading levels. However, the target represents what they view as a reasonable 14x current- year EPS estimate of $0.21, suggesting that the shares are undervalued relative to PRZ's underlying fundamentals and near-term growth prospects.

Notablecalls: Not actionable but good to know category.

- Piper Jaffray positive on Deckers Outdoor (NASDAQ:DECK) after meeting with Angel Martinez (CEO) and Zohar Ziv (CFO) who detailed growth strategies and financial objectives for the company's three brands. Management reaffirmed its commitment to 42%-44% gross margin and stabilization of expenses in the low-20% of sales. Firm believes product innovation and marketing initiatives are taking hold, leading to increased confidence in growth and view that estimates (and guidance) are appropriately conservative.

Firm estimates core underlying EPS growth in the mid- to upper-teens and views their 2H FY06 estimates as conservative given product development initiatives. At 13.7x FY07E EPS, DECK share are trading at a 20% discount to estimated FY07 EPS growth, in line with the footwear peer group mean, despite significantly higher operating margins (near 20% vs. group avg near 12%).

Notablecalls: Not actionable but good to know category.

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