Dell Inc.: Kaufman Bros. equity analyst Shaw Wu maintained a hold rating on shares of Dell Inc. (DELL) on May 21. He raised a price target on the shares to $14 from $13.
On May 20, Dell, the world's third-largest personal-computer maker, reported first-quarter gross margins that missed some analysts' estimates after rising component costs eroded the benefit of a rebound in corporate demand.
Gross margin, excluding some items, was 17.6 percent, Dell said in a statement.
The higher costs of some components, such as memory chips, cut into profitability for the second-straight quarter even as Dell won new buyers for PCs, which account for more than half of revenue. Dell is working to lessen its dependence on PCs by expanding into services, adding smartphones and readying a tablet to take on Apple Inc. (AAPL) and Hewlett-Packard Co. (HPQ).
"The gross margin is somewhat concerning," said Wu in a May 20 interview on Bloomberg TV.
Dell reported that first-quarter sales rose 21 percent to $14.9 billion. Net income rose 52 percent to $441 million, or 22 cents a share, from $290 million, or 15 cents, a year earlier. Profit, minus some costs, was 30 cents a share. Analysts on average projected profit of 27 cents on sales of $14.2 billion.
In a May 21 note, Wu said that Dell had a "nice quarter," but the company's gross margin and quality of earnings were "disappointing". Wu said that Dell's gross margin of 17.6% was below expectations of 17.9%; "it looks like DELL got hit harder on rising component costs" than Apple and Hewlett-Packard. Dell "has a much less diverse business model and thus much less room to maneuver," Wu said.
"In addition, the quality of earnings continues to be poor where there is a 27% difference between GAAP and non-GAAP EPS compared to 39% and 26% over the previous two quarters," Wu wrote.
The analyst raised fiscal 2011 estimates for revenue to $61.5 billion from $58.5 billion, and for earnings per share (EPS) to $1.20 from $1.15. "[W]e are assuming higher revenue offset by a lower gross margin thus our EPS raise is more muted," he wrote.
Clean Harbors Inc.: Wunderlich Securities equity analyst Michael Hoffman maintained a hold rating on shares of Clean Harbors Inc. (CLH), which provides environmental cleanup services, on May 21. He raised a price target on the shares to $62 from $55.
In a note, Hoffman said the stabilization of the company's technical services and industrial services segments in the first quarter of 2010, combined with the potential for an improved second half of 2010 and a stronger fiscal 2011 as economic growth in the U.S. and Canada remains positive, "suggests that fundamentals alone should support a higher valuation in line with our new price target".
"In the short term, speculation over the Gulf oil spill's potential impact to CLH 2010 guidance is overshadowing fundamentals," he wrote. "We believe the ultimate valuation impact of the Gulf spill event will be less than $3.00 per share."
Clean Harbors has 600 workers in the Gulf of Mexico region, Chief Executive Officer Alan McKim said on CNBC on May 5.