Bed Bath & Beyond Cut to “Underperform” at FBR Capital (BBBY)

in Gold Gold Investing by admin — March 11, 2010 7:04 am | no comments

Home goods retailer Bed Bath & Beyond Inc. ( BBBY ) caught a big downgrade on Thursday from analysts at FBR Capital Markets. The analyst cut its rating on BBBY to “Underperform” from “Market Perform.” FBR also cut its downside price target for the stock, which had closed at $41.67 on Wednesday, to $38. The firm noted that “BBBY is expected to cycle market-share benefits from the liquidation of former competitor Linens ‘N Things (LIN), who had fully liquidated from the home furnishings market through December 2008; 34% of BBBY’s store base competes closely with a former LIN store (within five miles, 57% within 10 miles). We think removal of LIN from the market has likely helped BBBY comps in 2009 by +/- 400 bps. The 4Q09E sales and EPS should be good for BBBY, per se (we model comps of up 8.5%), on the heels of “Home” commentary out of others; yet we expect that recent trends represent the best it gets, with many companies now cycling trough “Home” trends of a year ago (3Q08/4Q08). In addition to this, BBBY, also cycles relatively extraordinary SG&A trends of a year ago, as the company retrenched its cost structure (“controllable expenses”), with notable SG&A leverage seen commencing in 1Q09 last year (cycles 1Q10E).” FBR Capital also said it much prefers Home Depot ( HD ) and Lowe’s ( LOW ) in the home goods sector. Bed Bath & Beyond shares fell 78 cents, or -1.9%, in premarket trading Thursday. The Bottom Line Shares are trading near the 52-week high levels of $43 a share. The stock has technical support in the $37-$40 price area. We do not currently rate this non-dividend paying stock, but we do follow the company closely. Bed Bath & Beyond Inc. ( BBBY ) does not currently pay a dividend. Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .