Analysts have been sending out their research reports to their clients again this week. The following is a review of the most important downgrades for the week of May 7 till May 11.
Goldman Sachs has lowered its advice for Aetna (AET) from neutral to sell with a $45 price target. According to analysts commercial margins for the health insurance provider could continue to fall. After touching upon the $50 level in April, shares have fallen towards the $41 mark after the company reaffirmed its $5.00 operating earnings per share target for the entire year of 2012. Analysts anticipated a slight upward revision towards $5.15 per share.
Bank of America/Merrill Lynch initiated its advice for the Buckle (BKE) with a $42 price target as slowing growth drives underperformance. The retailer for casual apparel and footwear operates more than 400 retail stores across the nation. Shares are up 5% year to date to $43 after peaking at $50 per share. Analysts think further progress on comparables and margin expansion will be difficult as they expect slower square footage growth. Future earnings growth is expected to come in lower than its peers making the stock unattractive.
Procter & Gamble
Wells Fargo lowered its advice for Procter & Gamble (PG) to market perform. The company lacks short term catalysts and earnings growth for 2014 will come in lower than previously anticipated prompting a lower price target range of $64-$67. Shares in the provider of consumer packaged goods have fallen 6% year to date after the company lowered its full year earnings target.
Bank of America/Merrill Lynch lowered its advice for Aecom Technology (ACM) to underperform with a $20 price target. Analysts note that the company looks cheap but there are few triggers to boost the stock price of the technical and management support service company in the near term. Shares have fallen 19% so far year to date after the company reported a 15% decline in second quarter net income which prompted management in lowering the full year earnings outlook to $2.30-$2.45 per share.
Barclays Capital lowered its advice for BP Plc (BP) to underperform saying that the stock is not likely to move higher in the next twelve months as there are few signs that the company is close to a settlement with the US Federal Government and the Gulf states. Shares in the UK based integrated oil major have fallen 10% year to date amidst a generally weak equity sentiment in recent weeks and a correction in oil markets.
Bank of America/Merrill Lynch lowered its advice for Synacor (SYNC) from buy to underperform with a price target of $11 after the stock rallied over 50% in May to peak around $13. Despite a correction towards the $11 mark shares of the provider of online content and other services have returned some 117% year to date. Shares moved sharply higher on the back of a raise in the full year revenue guidance and the acquisition of Carbyn which produces a platform which delivers unified experiences for apps across multimedia devices.
As is well known, analysts research reports tend to be heavily biased towards the buy side. This makes any sell side research much more interesting as banks do not have to please their corporate customers in order to win investment banking deals. Unfortunately some of the recommendations come after the fact (often after an earnings release). Only the warning call of Bank of America on Synacor came ahead of a significant decline in the share price and is purely on the back of valuation and momentum signals after shares more than doubled in a month.