With the Dow flirting with 12,000 this morning, here’s a closer look at investment banking analysts’ latest stock notes today:
GENERAL MILLS (NYSE:GIS):
- CREDIT SUISSE (NYSE:CS): Quality is weak. Sales grew only 1.6% versus our expectation of 2.9% and the company cut media spending for the year more than we expected. We do not want to see the company slip into the negative spiral of cutting advertising to make numbers, especially not when the company is losing market share in its two most important categories – cereal and yogurt.
- CITI (NYSE:C): Positive outlook. U.S. retail sales were a little weaker than expected, down 1% with flat volumes. International, on the other hand, shined with sales up 8% and profits up 266%. Gro with in the cereal category is accelerating and we expect the growth rate next quarter to better reflect improvement.
GENERAL ELECTRIC (NYSE:GE):
- CREDIT SUISSE: Japan will hit EPS. GE Capital has $8 billion in Commercial Real Estate exposure in Japan and $10 billion in commercial receivables. There is a risk of additional impairments and provisions in the CRE portfolio.
- UBS (NYSE:UBS): We continue to believe Starbucks can deliver long-term double digit EPS growth as it executes against four growth areas which are: breakfast/snack/beverage occasions at retail, premium coffee, single serve brewing and international expansion (most notably in China.) Starbucks did offer a seemingly conservative eventual K-Cup system sales target of $1 billion which raises questions on its its new partnership with Courtesy Products.
MICRON TECHNOLOGY (NASDAQ:MU):
- CREDIT SUISSE: Profitable. MU continues to execute on a strategy to diversify its revenue stream to help mitigate the overall cyclicality of the business. While supply/demand still dominates the memory market, increasingly MU’s product mix is driving leverage.
- BARCLAYS (NYSE:BCS): Solid strategy. Management reiterated their strategy and focuses for the next several years, i.e., maintaining financial discipline, no major acquisitions, aggressive program to return cash to investors via double digit dividend growth and large share buyback program funded by continuing asset sales. We think COP could outperform the general market over the next 12 months.
- UBS: Growth opportunity. CAT is particularly bullish on China (crucial for global leadership due to size/growth profile of market), mining (where CAT forecasts demand to grow at an 8% CAGR through 2010) and engines. CAT is shifting focus to operating profit after 17% capital charge in order to determine which businesses are creating or eroding shareholder value.
- JPMORGAN (NYSE:JPM): The robust growth in commodity demand is the primary reason CAT is refocusing on the mining industry. In fact, demand for equipment will grow faster as raw materials are more difficult to mine today. The division expects to deliver higher incremental profits next cycle. Thus, with robust end markets fundamentals, all the group has to do is execute.