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Following are 7 large cap companies which have seen a negative shift in analyst sentiments in the last month and have received 2 or more analyst downgrades:

Tkr

Company Name

Market Cap (mil)

No. of analyst downgrades in last 1 month

NOK

NOKIA OYJ

34047.92

2

TYC

TYCO INTL LTD

23152.31

2

RIG

TRANSOCEAN LTD

22714.22

2

MBT

MOBILE TELESYS

19983.37

2

GPS

GAP INC

13424.95

4

MICC

MILLICOM INTL

11843.16

3

DISH

DISH NETWORK COR

10894.95

2


Here are some of the specifics about these companies, including a brief description of their business, growth rates (top-line and bottom-line) and valuation:

Nokia Corporation is a manufacturer of mobile handsets. Its EPS forecast for the current year is 0.65 and next year is 0.77. According to the consensus estimates, its top-line is expected to grow 6.99% current year and 2.87% next year. It is trading at a forward P/E of 11.96. Out of 31 analysts covering the company, 9 are positive and have buy recommendations, 7 have sell recommendations and 15 have hold ratings.

My Take: I think it's best to avoid Nokia's stock given the transition-related issues, which may cause significant market share losses in the near to medium term. Customers are becoming increasingly wary of buying legacy symbian phones which are likely to get phased out going forward. NOK-WP7 phones are likely to become meaningful volume drivers only in 2012. So, in the near to medium term, there is a good chance of continued volume declines.

Also, I don't quite agree with the argument that a valuation floor has been established. Nokia’s shares have fallen significantly since the NOK-MSFT agreement, and are currently trading at trading at ~ .55x P/S. However, if we analyze the trajectory of Motorola's (MMI) share price between 2006 and 2010, we will see that its P/S troughed below 0.2x sales at the worst time of the crisis. This means there is ample downside for Nokia before any pricing floor can be established. If one is positive on the Nokia-WP7 combination, it's best to take a position through Microsoft (MSFT) stock, or even Qualcomm (QCOM).

Tyco International Ltd. is a diversified company, which provides security products and services, fire protection and detection products and services, valves and controls, and other industrial products. It operates in five segments: ADT Worldwide, Flow Control, Fire Protection Services, Electrical and Metal Products, and Safety Products. Its EPS forecast for the current year is 3.05 and next year is 3.58. According to the consensus estimates, its top-line is expected to decline 0.42% current year and grow 4.69% next year. It is trading at a forward P/E of 13.67. Out of 19 analysts covering the company, 8 are positive and have buy recommendations, 1 has a sell recommendation and 10 have hold ratings.

My Take: Neutral. Tyco’s 3% organic and 7% order growth is among the lowest in Industrials this quarter. Even though it’s a late cycle company, I don’t see any significant earnings growth momentum going forward. The stock is pricing in takeout expectations which may provide some floor on the downside. However, I would not like to bet on it.

Transocean Ltd. is an international provider of offshore contract drilling services for oil and gas wells. The Company operates in two segments: contract drilling services and other operations. Its EPS forecast for the current year is 5.26 and next year is 6.65. According to the consensus estimates, its top-line is expected to grow 3.59% current year and 6.55% next year. It is trading at a forward P/E of 10.71. Out of 46 analysts covering the company, 24 are positive and have buy recommendations, 5 have sell recommendations and 17 have hold ratings.

My Take: Neutral. The stock is seeing downward revision in its consensus estimates. A Citi Analyst recently lowered his 2011 EPS estimate substantially (from $5.81 to $5.11) to adjust for increase in out of service days on many rigs and the stacking of three additional rigs. Further, recent Macondo Disaster and associated environmental liability may reduce some of the premium Transocean enjoys with respect to peers. Low valuations keep me neutral, rather than being inclined to sell.

Mobile TeleSystems OJSC is a telecommunications provider in Russia and the Commonwealth of Independent States, providing a range of mobile and fixed line voice and data telecommunications services, including transmission, broadband, pay-television and various value-added services, as well as selling equipment and accessories. Its EPS forecast for the current year is 1.98 and next year is 2.27. According to the consensus estimates, its top-line is expected to grow 9.34% current year and 8.52% next year. It is trading at a forward P/E of 9.2. Out of 21 analysts covering the company, 17 are positive and have buy recommendations and 4 have hold ratings.

My Take: Neutral, mostly on Industry concerns. The tighter competitive environment will continue to cap margins and RPM improvement. Rostelecom’s London listing may take Russian telecom money away from MTS.

The Gap, Inc. is a global specialty retailer offering clothing, accessories, and personal care products for men, women, children, and babies under the Gap, Old Navy, Banana Republic, Piperlime, and Athleta brands. Its EPS forecast for the current year is 1.86 and next year is 2.08. According to the consensus estimates, its top-line is expected to grow 1.42% current year and 2.87% next year. It is trading at a forward P/E of 11.09. Out of 32 analysts covering the company, 10 are positive and have buy recommendations, 3 have sell recommendations and 19 have hold ratings.

My Take: Sell. With capital restructuring complete, investors' focus is likely to shift towards sales trends which are worsening in company’s domestic business thanks to poor performance by Old Navy. International Business is also not performing up to its potential. Analysts from Goldman Sachs and Bank of America have recently lowered their rating for GPS. I think unless there is some positive data point in the form of encouraging monthly sales number, the stock price will continue to follow downward trend.

Millicom International Cellular S.A. is a global telecommunications company with mobile telephony operations. The Company also operates various combinations of fixed telephony, cable and broadband businesses in five countries in Central America. Its EPS forecast for the current year is 7.08 and next year is 7.89. According to the consensus estimates, its top-line is expected to grow 14.39% current year and 8.79% next year. It is trading at a forward P/E of 13.76.

My Take: Neutral, mainly to avoid the uncertainty surrounding the company’s delisting from the Nasdaq stock exchange and any potential selling pressure related to delisting. Otherwise, fundamentals of the company are strong as evident from better than expected Q1 results.

DISH Network Corporation is a pay-television provider. The Company’s products include Programming, Receiver Systems, DISHOnline.com, DISH Remote Access and Google TV. Its EPS forecast for the current year is 2.69 and next year is 2.7. According to the consensus estimates, its top-line is expected to grow 4.69% current year and 1.88% next year. It is trading at a forward P/E of 9.1. Out of 22 analysts covering the company, 13 are positive and have buy recommendations, 2 have sell recommendations and 7 have hold ratings.

My Take: Strong Buy. After yesterday's settlement between DISH and TIVO, a major overhand on DISH's stock price has gone, which may cause analysts to turn positive on the stock. Further, strong first quarter results indicate improving business fundamentals. The stock is likely to open gap up (Monday). But given the magnitude of positive news, investors may still buy it and the stock is likely continue to outperforming in the medium term.


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 7 Large Caps With Analyst Downgrades in the Last Month