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 June 18th to June 22th.
FBR Capital Markets lowered its advice for ITT Corporation (ITT) from market perform to underperform with a $15.5 price target. Shares have some 14% downside potential according to analysts. Shares in ITT Corporation fell 6% this week as analysts see weakness for the firms business in Europe and China. FBR reduced the full year earnings guidance to $1.55-$1.70 per share as a third of ITT's sales can be impacted by weakness in Europe, including the auto component business. Shares in ITT have seen a 25% correction in recent months amidst worries about the impact of an economic slowdown on the business.
Citigroup lowered its advice for Wright Express (WXS) from neutral to sell with a $56 price target. Shares of the business payment processing and information management solution provider have some 3% downside according to analysts. Analysts note that the company faces near term pressures from declining fuel prices, lack of new contract announcements and increasing economic uncertainty". Citigroup expects the guidance and consensus estimate for the full year of 2012 to come under pressure after the company already guided for a soft second quarter a month ago. Shares lost more than 3% after the downgrade, limiting year to date gains to 6%.
JMP Securities lowered its advice for Adobe Systems (ADBE) from market perform to underperform with a $26 price target. Analysts see some 15% downside potential for the software company after Adobe issued a third quarter earnings per share guidance of $0.59-$0.61 vs. analysts estimates of $0.61 per share. The company also cut is sales outlook on the back of significant exposure to Europe. Despite the bad news this week shares are still up 12% on the year.
Goldman Sachs lowered its advice for Rockwell Collins (COL) to sell with a $46 price target. Goldman sees some 5% downside potential for the producer of communication and aviation electronics for commercial and military customers. Goldman expects shares to underperform its aerospace peers during the cycle. "The company is structurally challenged given its exposure to the defense industry given new disruptive competition." There will be limited to no growth in the coming years as a result of spending cuts. So far this year shares have fallen 13%.
Goldman Sachs lowered its advice for ConocoPhillips (COP) from neutral to sell with a $58 price target. Following the stock's recent outperformance analysts see very limited upside for the stock in the coming 6 months. "Conoco shares continue to trade more like a defensive super major rather than a somewhat higher-beta domestic oil/E&P post the spin-off of its downstream assets." Shares in ConocoPhillips rose more than 3% during the last month despite a significant decline in oil prices.
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).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.