Oxen Group EquityAnalytics: Updates On Dean Foods, Dow, Rockwood Holdings, Tim Hortons

Includes: DF, DOW, QSR, ROC
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 thoroughly researched and use financial analysis tools to determine stock prices. Today, we are updating the following companies from our coverage - Dean Foods (DF), Dow Chemicals (DOW), Rockwood Holdings (ROC), and Tim Hortons (THI).

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

(Click to enlarge)

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DF - Downgrade from Buy to Hold, Decrease PT from $15 to $14

Dean Foods is looking like a Hold right now after a nice price increase over the past couple months with the market. It is starting to look fair valued at these levels, and we actually dropped our price target for the rest of the year from $15 to $14. The drop in price was not significant, and we just do not see it as a great value at these prices right now. The company did miss our fiscal year estimates for operating income in 2011, and we just believe that upside might be somewhat limited past the low teens without market help. The company has done a great job with their cost-cutting plan and has drawn down debt. Yet, at the same time, capital expenditures are moving higher than we expected. Additionally, besides cutting costs and trying to get lower priced on milk what else can the company do? They are very dependent on commodity inputs, which, while dropping in the near-term, will get more expensive over the years. We would buy DF on any dip as they are much more solid than two years ago, but the stock price continues to not reflect the fundamentals because the numbers are not there yet.

DOW - Maintain at Hold, Increase PT from $29 to $31

Dow has moved very well with the market, but we do not believe that current valuations have a lot more upside. The company actually missed our 2011 estimates for operating income, which was surprising. Further, they have increased their debt load a lot. The actual increase in PT comes a lot from lower than expected capex as well as larger than expected depreciation levels. We continue to prefer more specialized chemical companies over DOW, and at its 17 PE, the company is looking very fair valued right now.

ROC - Maintain at Hold, Increase PT from $41 to $51

Rockwood is the high-growth company in the chemicals industry, so its price target is always hard to nail down. ROC is fairly inexpensive at current valuations, but we did not increase our price target further to match growing EPS because the company actually missed our expectations for operating income. The company, though, is growing at astounding rates and does have a low PE at around 10. The issue, though, is that ROC has a pretty significant amount of debt we would like to see them work off as well as lowering capex to lower rates. Those two things would push this price target higher.

THI - Maintain at Hold, Increase PT from $58 to $64

Tim Hortons is one of our favorite holdings in restaurant/cafe area. The company has solid growth at 8-9% per year and has the ability to expand greatly in the USA. The company has a decent dividend at 1.6% yield, and we believe that the stock has value on any pullback. The company has a great balance sheet, low beta, decent growth, nice cash flow, and growth potential. All good things! They do lack a bit of an economic moat and are breaking into a large market, but we believe there is enough coffee/breakfast dollars to go around for this stock to see even more growth.

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