Oxen Group Upgrades/Downgrades: Coca-Cola, Panera, Ralph Lauren And More

by: David Ristau

Our EquityAnalytics department is always updating price targets and ratings on companies that we have coverage on based on new information. Our price targets and ratings are throughly researched and use financial analysis tools to determine stock prices. Today, we are updating the following companies from our coverage: Columbia Sportswear (NASDAQ:COLM), Cott (NYSE:COT), Georgia Gulf (GGC), Coca-Cola (NYSE:KO), PepsiCo (NYSE:PEP), Pulte Homes (NYSE:PHM), Panera Bread (NASDAQ:PNRA), and Ralph Lauren (NYSE:RL).

The chart below shows new ratings, price targets, and buy/sell ranges versus old ones: (Click to enlarge)

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COLM - Maintain at Hold, Decrease PT from $54 to $53

Columbia continues to be an interesting niche play in the apparel manufacturing arena as its clothing line is growing, but not at a rapid rate like others that we would rather buy. We look at COLM as a stock we pick up on a dip that creates value. The company is a solid Buy at $42, but we did not like the latest quarter's drop in guidance. That drop made us drop some of our estimates, which ended up giving us just a slightly lower price target. We were happy to see that sales are increasing, but the winter months' warmth really hurt sales. That issue will limit upside. Seasonally, we would say COLM may dip in the summer and a move to $42 would be a nice place to pick up the stock.

COT - Maintain at Buy, Decrease PT from $13 to $9

Cott is having a rough time right now as sales of soda pops continue to dwindle overall. With some of the major names not seeing much decline, that decline is being felt more by smaller names like Cott. The company is also suffering from strong commodity cost increases. Despite margin drop, the company is still seeing growth in sales, albeit on a limited basis, and we believe with the company trading at a 9 future PE, that the problems of commodities are short-term issues that can be solved. Margin increase will really heighten EPS and make this stock increase in price significantly. We believe that COT will be able to do this, and therefore, this is a great value play right now.

GGC - Downgrade from Buy to Hold, Maintain PT at $32

Georgio Gulf has increased in value and no longer looks like a Buy. The stock looks pretty fair valued right where it is right now. We believe the company is well positioned, but it is a low-growth chemical company that is not going to see major valuation increases in the near-term. We believe it can only be bought on a major dip.

KO - Downgrade from Buy to Hold, Decrease PT from $94.50 to $85

Coca-Cola has been one of our favorite staples to play over the past several months, and while the company currently is breaking higher, we think upside is limited past $85. We dropped our price target for two reasons. First, KO missed our estimates that we had set for the company in 2011. Margins dropped significantly in 2011 as commodity costs rose and conversions in currencies hurt as well. That drop in income was more than we had expected it to be, and that was one of the reasons we bought our targets down. Further, the company has increased debt levels a lot as of late, and that hurts equity value as well. We believe this is a great company, and it is a great buy at just slightly under $70.

PEP - Maintain at Hold, Increase PT from $70 to $80

Pepsico saw a lot of its PT increase come from the fact that we reduced our discount rate on the company even further. The stock continues to drop its beta, which is a big part of our calculation of WACC. The company is one of the few to actually drop its beta over the past couple months. That drop allows us to discount Pepsi at a lower rate. The company, further, is looking more and more solid right now. While we believe several beverage companies (KO, MNST, and DPS) are better fundamentally right now, PEP is looking like it is a company that is going to be the safest for investments. Shares offer a 3% yield, and we believe they offer a nice entry at below $65.

PHM - Maintain at Hold, Increase PT from $7.50 to $9

Pulte Homes remains at Hold. The company definitely outpaced our projections for 2011 by about $100M in operating income. That jump in income as well as some metrics that are starting to improve for Pulte gave us the jump in price. We believe the company is still one of the weakest in the industry. Pulte remains very far from profitability and has a massive amount of debt still sitting on the balance sheet. Right now, we would definitely prefer DR Horton (NYSE:DHI) or Meritage (NYSE:MTH) for an investment.

PNRA - Downgrade from Buy to Hold, Increase PT from $170 to $176

Panera Bread is one of our favorite stocks in the industry. While upside is starting to appear more limited right now, we do believe that this is one of the best companies out there and highly recommend investing on a move around $140. Further, we are being very cautious in our targets with PNRA. The company, while it has been strong, started to show some margin issues in its last earnings report. Rising commodity costs will negatively affect the company. We believe, though, that its growth story is very strong. If we see margins stay flat to even up, we believe our target is fairly conservative. A more aggressive model pushes our PT to $190. Yet, we see commodity costs as an issue for Panera and this may keep the stock price in check over the next six months.

RL - Maintain at Hold, Increase PT from $154 to $175

Ralph Lauren is looking really solid right now, and we believe that the market is pricing in a lot of the growth that the company is experiencing. We do not see the company as a Buy right now, as we believe Ralph Lauren is going to be limited in upside from here. The company is operating at just under a 26 PE, and we see that as fairly significant for an older company that is not new to the industry and operates in a fairly low-growth retail market. At the same time, RL is one of the best growth stocks in the apparel manufacturing industry, so some valuation increases should be there. Another issue to watch is the slowdown that seems to be starting in China. Will a drop in manufacturing and mid-to-lower income have any impact on RL? Sit tight for now. Buy on any dips!

Disclosure: I am long KO, PNRA, DHI.