div style=”text-align: justify;”Deutsche Bank is upgrading their rating on span style=”font-weight: bold;”Saks (NYSE:SKS)/span shares to BUY, from HOLD (with $7 tgt), as they now have conviction that SKS has solid initiatives amp; strategies currently in place that will drive FY12 EBIT margins toward FY07 levels (+4.39%). There appears to be more drivers to achieve this goal than previously anticipated, though it is clear that sales acceleration, which is highly correlated with the stock market, will be the key driver in achieving sustained long-term improvement. Mgmt’s initiatives to rationalize the business will create a substantial margin benefit to the upside.br //divdiv style=”text-align: justify;”br /a onblur=”try {parent.deselectBloggerImageGracefully();} catch(e) {}” href=”http://3.bp.blogspot.com/_YzBo7Kz5y1M/SjI7Pu5w3iI/AAAAAAAAAGI/V8GpnFQQUzw/s1600-h/SKS_comps.GIF”img style=”margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 245px;” src=”http://3.bp.blogspot.com/_YzBo7Kz5y1M/SjI7Pu5w3iI/AAAAAAAAAGI/V8GpnFQQUzw/s400/SKS_comps.GIF” alt=”" id=”BLOGGER_PHOTO_ID_5346400849116585506″ border=”0″ //abr /span style=”font-weight: bold;”Market Stabilization to Drive Sales; Substantial Expense Leverage to Follow/spanbr /Saks’ comps are highly correlated to the stock market (0.83 since the start of the recession). Therefore the firm believes it is highly likely that sales will improve substantially as the Dow recovers to levels that assure luxury consumers. Saks has done an impressive job of managing expenses in this environment, and they believe coming out of this slowdown, they will be able to leverage a flat comp. Gross margin will also benefit from better aligned inventory levels, and other op. initiatives. There also remains substantial value in the company’s real estate (NAV $6.76) and SKS recently accessed the capital markets, proving liquidity amp; solvency.br /br /span style=”font-weight: bold;”Increasing EPS Estimates/spanbr /The nature of Saks has changed – management is no longer spending like a luxury customer. The SGamp;A cuts that Saks has achieved are permanent, and Deutsche would not expect these expenses to return. Even though sales may never accelerate to the level of 2002 – 2006, sales should recover with the stock market. They are adjusting their EPS estimates further above Consensus and to new highs on the Street. Deutsche’s new FY09 EPS estimate goes to -$0.71 (-1.2% y/y) from -$0.73 previously, FY10 EPS becomes -$0.37 (+47.5% y/y), from -$0.64 previously, and FY11 EPS estimate becomes $0.02, up from -$0.18 previously.br /br /span style=”color: rgb(255, 0, 0);”Notablecalls:/span Certainly an interesting call from Deutsche:br /br /- As the firm notes their estimates are the new Street high.br /br /- The $7 target offers close to 100% upside. Not something you see every day in the space.br /br /- There’s a 20%+ short interest in the name. Looks like a squeeze in the making.br /br /span style=”font-weight: bold;”All in all, I think there’s a 10-15% move in store for SKS today./span/divdiv class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/29297569-6506475265773098692?l=notablecalls.blogspot.com’//div

Last 5 posts by Notable Calls

• Petroquest Energy (NYSE:PQ): Compelling Valuation with Near-Term Catalysts; Upgrading to Overweight - J.P. Morgan - October 29th, 2009
• 15% correction coming in SP500? - October 21st, 2009
• Boeing (NYSE:BA): Downgraded to Underweight at Morgan Stanley, target to $43 - October 20th, 2009
• Par Pharmaceuticals (NYSE:PRX): Upgraded to Overweight at Barclays; target raised to $30 - October 15th, 2009
• Wyndham Worldwide (NYSE:WYN): Upgraded to Buy at Goldman Sachs; $26 target established - October 7th, 2009