The Zacks Analyst Blog Highlights: Staples, Citi Trends, Lumber Liquidators Holdings, DSW and Masimo

Oct 14, 2013, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Oct. 14, 2013 /PRNewswire/ -- announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Staples, Inc. (Nasdaq: SPLS-Free Report), Citi Trends, Inc. (Nasdaq: CTRN-Free Report), Lumber Liquidators Holdings, Inc. (NYSE: LL-Free Report), DSW Inc. (NYSE: DSW-Free Report) and Masimo Corporation (Nasdaq: MASI-Free Report).


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Here are highlights from Friday's Analyst Blog:

Bearish View on Staples

We downgraded our long-term recommendation on Staples, Inc. (Nasdaq: SPLS-Free Report) to Underperform as it continues with its dismal performance for the second consecutive quarter in fiscal 2013. The stock currently carries a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

Estimates for Staples have shown a downtrend since the company reported disappointing second-quarter results on Aug 21, 2013. The company continues to disappoint on the sales and profitability front, as decline in business and consumer spending in the wake of the global meltdown and the deterioration of credit markets have resulted in soft demand for big-ticket items.

Lower sales on account of store closures and lower product margins took a toll on the company's performance. The quarterly earnings of 16 cents a share missed the Zacks Consensus Estimate and decreased 15.8% year over year. Total sales also declined 2.2% year over year to $5,314.7 million and fell short of the Zacks Consensus Estimate of $5,381 million.

The company's international operations remain a concern in the quarter with sales waning 8.3% to $946 million, reflecting lower revenue from Europe and Australia.

Going forward, we expect the demand for office products to remain soft. Moreover, margins are likely to remain under pressure owing to the company's price investment and macroeconomic headwinds.

Given the near-term challenges, the company lowered its earnings and sales guidance for fiscal 2013. Staples now expect earnings to be in the range of $1.21 to $1.25, down from its earlier guidance range of $1.30 to $1.35. Moreover, total revenue is expected to decline in the low single-digits compared with its earlier guidance of low single-digits increase in sales.

The lower-than-expected results triggered a downtrend in the Zacks Consensus Estimates, as analysts become less constructive on the stock's future performance. This is evident from the movement witnessed in the Zacks Consensus Estimate that fell 7.5% to $1.23 for fiscal 2013 and 7.7% to $1.31 per share for fiscal 2014 in the past 60 days.

Other Stocks That Warrant a Look

Not all retail stocks are performing as disappointingly as Staples. Other stocks worth considering in the retail sector, include Citi Trends, Inc. (Nasdaq: CTRN-Free Report) and Lumber Liquidators Holdings, Inc. (NYSE: LL-Free Report) both sporting a Zacks Rank #1 (Strong Buy), and DSW Inc. (NYSE: DSW-Free Report) holding a Zacks Rank #2 (Buy).

Masimo Presents Encouraging Study

Masimo Corporation (Nasdaq: MASI-Free Report), a leader in non-invasive monitoring technology for patient care, recently revealed encouraging results from a multi-center study of its rainbow Acoustic Monitoring (RAM). This positive piece of news should boost investor confidence in the stock. The company's stock returned a solid 22.3% to its investors on a year-to-date basis.

The study had analyzed the efficacy of RAM in comparison to capnography (nasal cannula) in post-surgical pediatric patient population. Results revealed that, despite having similar accuracy like capnography, RAM displayed better patient tolerance. The multi-center trial results were announced in Pediatric Anesthesia and conducted by researchers at Cincinnati Children's Hospital Medical Center, University of Arizona Medical Center, and Children's Medical Center at Dallas.

RAM is used to measure respiratory rates in a non-invasive manner (with a cloth adhesive sensor worn around the neck), thereby allowing better comfort for children. Researchers concluded that acoustic monitoring is a safer option to continuously monitor respiration rate in pediatric patients. Positive results from the clinical trial have highlighted MASI's capabilities in developing products that are safe and reliable.

In September, MASI had entered into an agreement to sell its Masimo Patient SafetyNet to U.S.-based Saint Alphonsus Regional Medical Center. The 387-bed facility will install the device in patient rooms on orthopedic, general surgery, and neurology floors. Earlier, Masimo had forged an alliance with University Children's Hospital in Basel, Switzerland. The hospital was the first pediatric institution in the region to utilize the Masimo Patient SafetyNet in its general wards.

Currently, Masim haso a Zacks Rank #2 (Buy). MASI had reported earnings of 30 cents per share that beat the Zacks Consensus Estimate by 3 cents in the last reported quarter. Its revenues (including royalties) went up almost 12.0% to $137.4 million, also exceeding the Zacks Consensus Estimate of $136 million.

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