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Martha Stewart Living Omnimedia Fundamentals Has Major Risk Of Eroding Sharply - CS First Boston Comments

(RealTimeTraders.com) - Tuesday morning, CS First Boston did not change its view on Martha Stewart Living Omnimedia, Inc. (MSO) despite the company reporting better than expected second quarter EPS.

Analyst William Drewry noted that MSO posted second quarter EPS of $0.02, better than its management's guidance of a loss of $0.05-0.03, and his estimate of a loss of $0.03.

Acknowledging MSO management’s incredible efforts to improve the capital reserves in the face of extremely adverse operating conditions, the analyst, however, noted that the deteriorating earnings on a forward basis is a major concern.

Further, the brokerage views that there is significant risk that the company fundamentals could erode precipitously over the next 24 months, with no positive catalyst visible at this point to make the stock price increase.

The brokerage also believes uncertainty will continue until the legal issues for MSO founder Martha Stewart are resolved. That said, the brokerage lowered its Q3 estimate to a loss of $0.15 from a gain of $0.03.

Concluding, CS First Boston maintains its Underperform rating on MSO shares with a price target of $10-5. On Monday, the stock closed at $7.84.

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