In yet another week that saw the markets continue to march higher, some of the top Wall Street firms that we cover were continuing to lower the boom with Sell ratings on some very high-profile names. Most equity strategists have conceded that we have turned the corner and are in a secular bull market for the first time in almost 15 years. When stocks underperform and underdeliver when times are seemingly better, the analysts can be quick on the draw with a Sell rating.
We wanted to look back at the top five analyst Sell ratings for the week. It will be interesting to see ultimately the overall effect on the stocks that were cut to a Sell. One thing is for sure, given the names that are hitting the Sell lists, analysts are not sparing anybody for previous stature or market cap.
Burger King Worldwide Inc. (NYSE: BKW) recently beat fourth-quarter earnings estimates, but it missed on revenues. Even though Burger King posted higher earnings in the quarter, its revenues have been soft due to difficult consumer discretionary environment in the United States. Government budget cuts, high tax rates and still-tightened credit availability continue to hurt consumers’ discretionary spending. Investors are paid a 1.1% dividend. The Merrill Lynch price target for the stock goes from $18 to $20. The consensus estimate is at $25.78. Burger King was trading Friday just over the $26 level. This could simply be a valuation call.
General Mills Inc. (NYSE: GIS) caught an Underperform rating this week from the analysts at Jefferies. Revenue for the quarter stood at $4.88 billion, which was flat from last year. The company reported that demand for cereals and packaged food had weakened. It also cited unfavorable currency movements that offset increased prices. The decline in customer interest mainly occurred because of customers’ unwillingness to open their wallets for premium product. The stock does pay shareholders a 3% dividend. The Jefferies price target is $44, and the consensus clocks in at $51.31. General Mills traded Friday just shy of $50.
Goodyear Tire & Rubber Co. (NASDAQ: GT) may also be a straight valuation call. The stock roared last week on the back of good earnings. With bad weather severely slowing new car sales, and the stock very close to 52-week highs, the logic is there. Much of Wall Street does not seem to agree. Investors are paid a tiny 0.7% dividend. The Merrill Lynch target is raised from $11 to $18. The consensus target is $28. Shares traded Friday at $26.65.
Lockheed Martin Corp. (NYSE: LMT) is a Sell-rated stock at UBS. This again, is most likely a straight valuation call at UBS. With the stock trading near a 52-week high and the ability to drive earnings appreciably higher, the money plain and simple may have been made on this name. Investors are paid a 3.3% dividend. The UBS price objective is $137, and the consensus target is $159.65. The stock traded Friday just below $165.
Microsoft Corp. (NASDAQ: MSFT) is an unusual name to catch an Underperform rating from Merrill Lynch. While the call may be a pure valuation statement, the company will go through an arduous process of shifting power in the CEO office, something that has only happened three times in the history of the software giant. Investors are paid a 3% dividend. The Merrill Lynch target is a benign $35, while the consensus is higher at $38.42. Microsoft traded Friday just under the $38 level.
Clearly the big Wall Street firms are looking for either valuations that are passed their fair market values or companies that are failing to achieve sales and revenue goals. One thing is for sure, just because you are a high-profile name, that alone will not keep you out of the Sell rating penalty box.
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