Merrill Lynch lowered targets for the companies’ earnings per share by an average of 2 percent in 2008 and 3 percent in 2009 to reflect the continued decline by the U.S. currency against the euro as well as a weaker economic outlook for next year, according to a report issued Monday.

“Price objectives have been cut across the board,” wrote Antoine Colonna, leading a group of analysts. “Our only ‘buy’ recommendations are for LVMH Moet Hennessy Louis Vuitton SA and Swatch Group, which we expect to benefit from a strong exposure to emerging markets.”

Merrill’s lower outlook follows similar downgrades from Deutsche Bank AG and Goldman, Sachs & Co. this month as economies slow and consumers retrench. The dollar has fallen 8 percent against the euro so far this year, reducing European companies’ revenue from the U.S. and other nations with currencies pegged to the dollar.

“The deterioration of the dollar is continuing to take its toll on 2008 luxury earnings and suggests we should start to factor in a negative impact on 2009 forecasts,” Colonna and the others wrote in the note.

Shares drop

PPR fell 78 cents, or 1.2 percent, to 64.20 at 8:26 a.m. Monday in Paris. The bank cut PPR’s price target by 19 percent to 69 euros and lowered its EPS forecast 1 percent to 7.44 euros per share.

Bulgari fell 1.4 percent to 6.60 euros in Milan. Merrill Lynch cut its share-price estimate 14 percent to 6 euros from 7 euros and reduced EPS and sales targets for the Rome-based jeweler by 3 percent.

Swatch’s price target was lowered by 18 percent to 300 Swiss francs, while its EPS forecast was cut to 19.41 francs from 19.67. Its shares were little changed in Zurich.

Merrill also cut its price target for Tod’s SpA, the Italian brand known for its rubber-studded Driving Shoe, by 18 percent to 31.5 euros and lowered its sales and EPS forecasts by 2 percent to 700 million euros and 2.79 euros, respectively. The stock fell 49 cents, or 1.5 percent, to 32.52 euros.

Burberry Group Plc, the British brand known for its plaid pattern, fell 8 pence, or 1.7 percent, to 454.75 pence in London.

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