Tech Data Trading Fairly
Tech Data (TECD) reported solid fourth quarter results. Sales were $40 million above consensus, while earnings per share were $0.08 above the consensus. And unlike competitor, Ingram Micro (IM), Tech Data's first quarter outlook was slightly ahead of consensus estimates.
As a result, we are increasing our fiscal year 2009 sales estimate from $23.82 billion to $24.26 billion and our 2009 EPS estimate from $2.72 to $2.80. We are also introducing our fiscal 2010 estimates: forecasting sales growth of 3.6% and EPS growth of 11.9%.
All told, the stock is trading at a reasonable valuation of 12.3x our 2009 EPS estimate and 11.3x our 2010 EPS estimate. Our target price of $36 is 13x our 2009 earnings estimate.
Continue Selling MannKind
MannKind (MNKD) is a biopharmaceutical company focused on the discovery, development and commercialization of therapeutic products for diabetes, cancer and inflammatory diseases. Its lead product, the Technosphere Insulin (TI) System for the treatment of diabetes, is in phase III trials in the U.S. We believe Technosphere has certain intriguing beneficial characteristics that could make the product a success.
However, the company has been unable to find a partner for the drug, competition is fierce in this field, commercialization is still at least two years away and the company is burning cash at too high a rate. We maintain our Sell rating for the stock with a revised target price of $6.00.
We are worried about the impact of Pfizer's (PFE) pullout of the only approved insulin product, Exubera, on the sales of Technosphere Insulin upon launch. Exubera was launched in September 2006. Exubera sales have been disappointing so far, to say the least. Given the withdrawal of marketing support for Exubera by Pfizer, we are only cautiously optimistic about Technosphere.
Nordstrom Should be Range-Bound
Nordstrom (JWN) reported fourth quarter earnings per share of $0.92, which was $0.03 ahead of consensus estimates. The upside was due to better-than-expected gross margins. However, the company issued guidance below expectations.
Management expects first quarter EPS of $0.49-$0.54 vs. the prior consensus of $0.59, and full-year EPS of $2.75-$2.90 vs. prior consensus of $2.91. While we think JWN is one of the better ways to invest in retail, its stock is likely to be range-bound for the next few quarters. As a result, we maintain our Hold rating.
Our $39.25 target price is about 14x 2008 EPS estimate. JWN shares now trade at 13.4x our fiscal year 2008 EPS estimate and 12.2x our fiscal year 2009 EPS estimate. JWN shares trade at a slight premium to its long-term growth rate, but well below its five-year average P/E of 18.7x.
Given our negative view of the current environment for retailers, we prefer to remain neutral on JWN shares. As such, we think the stock will trade in line with the overall market for the next six months.
Buy-Rated Plexus Ests Adjusted
Plexus (PLXS) has posted several quarters of strong results, with significantly higher-than-expected revenue and bookings. Although EPS has not been as strong, much of this is related to a higher tax rate. We believe that PLXS is among the best-positioned in the industry and is poised to grow in the medical segment as well.
