Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
This afternoon, as on most days, we saw analysts making predictions on a number of companies. So let's look at what the "experts" had to say today about Burger King Worldwide (BKW.DL) to make its shares climb 1.72%, and about Skechers (SKX -0.79%) to cause its stock to fall 7.42%. Then we'll see what Fitch thinks about J.C. Penney's (JCPN.Q) announcement that it will close 33 stores in the near future.
First off, Goldman Sachs upgraded Burger King from a "buy" to a "conviction buy" and increased its price target from $25 to $28. The Goldman analyst thinks that when existing debt is callable in April 2015, Burger King can lower its debt expense and maybe even initiate a dividend, since it has a large amount of cash on its balance sheet that it needed to maintain because of restrictions associated with its current debt. With the company expected to be at 2.5 times debt to EBITDA in April 2015, management could lever the company up to around 4 to 6 times, which would be more in line with its peers. Goldman's current price target represents a 24% upside to the stock and has a 12-month time frame on it.
BB&T, meanwhile, downgraded Skechers from "buy" to "hold," believing that the company will soon face slower growth and weakening margins. Oddly enough, Susquenhanna and Sterne Agee both defended the shoe company after BB&T's downgrade, with Susquenhanna stating that based on its own checks, revenue and EBIT remain on track. This is certainly one stock that has the analysts disagreeing, which Sterne Agee takes to mean that investors could find a great buying opportunity in Skechers.
As for J.C. Penney, shares fell 0.46% even as the Fitch ratings agency said it thinks the retailer's cash flow won't suffer despite plans to shutter 33 locations, since the stores targeted for closing have been underperforming for some time. That should be good news for both shareholders and bondholders, as it means the company should be able to service its debt, thus allowing Fitch to maintain its current debt rating on the company and, if necessary, offer management other opportunities to raise cash in the future. But that's a perfect-world scenario, and as things sit right now, I have a hard time seeing J.C. Penney's debt rating and its ability to service it getting any better in the short term.
Whether you agree with these upgrades and downgrades or not, they're just the opinions of a few analysts and aren't guaranteed to play out. It's always best to consider a number of opinions before making a buy or sell call, but a Wall Street analyst's opinion shouldn't carry more weight than anyone else's.
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