EquityAnalytics: LDK Solar, Toll Brothers And Big Lots

by: David Ristau

Earnings season is over now, and we are continuing to update price targets, buy/sell ratings, etc. for companies that we currently cover in our EquityAnalytics department. Today, we have updated several more companies with these ratings. They include – Big Lots (NYSE:BIG), LDK Solar (NYSE:LDK), and Toll Brothers (NYSE:TOL).

The chart below shows new ratings, price targets, and buy/sell ranges versus old ones:

Unknown ObjectBIG – Maintain at Buy, Decrease PT from $54 to $51.50

Big Lots is one of our favorite long-term holdings. Not only is this a solid company that did well during the Recession-era and has been turned around over the past several years, but they remain one of those continuous buyout candidates that will go for at least $50 - $60 per share on a buyout if one does come. The company was close to one earlier this year, and while it did not go through, they remain a target. The latest quarter was another good one for the company as they rose expectations, and they received a lower net income due to acquisition of Liquidation World. They continue to see revenue increases, but a drop in margin and continued worry about the economy brought about our drop in price target.

LDK – Maintain at Hold to Buy, Drop PT from $15.50 to $8.50

LDK Solar like most other solar companies saw a major hit to their business in Q2, and we are not sure about the company's coming quarters. We had to significantly cut our estimates for the company as they are looking like another weak quarter is ahead for them. We do believe at these levels LDK is undervalued, but the company has a lot of risk and upside is not significant at this time. Our targets for the year are definitely liquid right now, and the solar market is definitely unpredictable right now. We do not see LDK as one of the stronger solar companies, and we would much rather be buying GT Advanced (GTAT), Trina Solar (NYSE:TSL), or First Solar (NASDAQ:FSLR) at current levels. The company has over $3B in outstanding debt at the end of this quarter, which gives them 10x debt than our operating income estimates for the year. Not good ...

TOL – Downgrade from Hold to Sell, Decrease PT from $19.50 to $14

Toll Brothers latest quarter was not as good as some perceived. The company's strong earnings were on a one-time gain from a tax refund that will not be something the company can count on moving forward. We have decreased our target not from the fact that we believe the company did much different in earnings. They came in as expected, but we increased our discount rate as the company is not growing as fast as we had expected to return to profitability on operating income. The company is still seeing declining revenue levels. We estimate that the company will not see positive operating income for a full year until 2013.

Good Investing,

The Oxen Group

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