S&P Picks and Pans: Apple, Freddie, Sears, US Airways

Analyst opinions on stocks making headlines Thursday

From Standard & Poor's Equity Research

S&P REITERATES BUY OPINION ON SHARES OF APPLE INC.

AAPL; $137.39

Dow Jones MarketWatch has reported that the invitation Apple sent reporters for a special event on Sept. 5 included graphic images suggesting that new iPod products would be the topic of the event. We note the benefit to prospects for unit sales and premium pricing if Apple can offer improved iPod products in time for the busy year-end sales period, and this boosts our confidence in our revenue outlook. We note that iPods accounted for about 40% of Apple's total revenues for fiscal 2006 (ended September). We are keeping our 12-month target price of $170. /T. Smith-CFA

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF FREDDIE MAC

FRE; $60.14

After the company's second-quarter conference call, we are concerned about Freddie's sharp rise in provisions for credit losses at $320 million vs. year-ago $56 million, reflecting a significant pickup in delinquency and default rates. That said, Freddie may benefit if it is able to purchase mortgage-backed securities above the current voluntary cap. We are lowering our 2007 and 2008 EPS estimates by 36 cents and $1.07, respectively, to $3.15 and $4.93, to reflect likely higher provisions. Our 12-month target price remains $65, 2.3 times current book value of $28.10 (excluding preferred) a slight premium to historical levels. /S. Plesser

S&P REITERATES HOLD OPINION ON SHARES OF SEARS HOLDINGS

SHLD; $142.43

July-quarter operating EPS of $1.17, vs. $1.75 one year earlier, misses our estimate by 7 cents on seasonal apparel markdowns and lack of expense leverage on a 4.1% decline in consolidated same-store sales. Given reported sales increases in women's apparel at both Kmart and Sears, and in electronics and footwear at Sears, we think the company's re-merchandising initiatives are paying off. But we see tough retail conditions slowing the company's turnaround. We are reducing our fiscal 2008 (ending January) operating EPS estimate by $2.00 to $8.00. We are lowering our target price by $25 to $155 on revised peer p-e valuations. /J .Asaeda

S&P REITERATES HOLD OPINION ON SHARES OF US AIRWAYS GROUP

LCC; $30.07

We are lowering our 12-month target price on US Airways shares to $34 from $37. This reflects our view that pricing pressures on domestic routes is likely to increase, along with stubbornly high fuel prices. In addition, high-beta stocks such as US Airways are unlikely to see p-e expansion in the current risk-averse investing climate that we think is likely to persist in the wake of subprime credit and liquidity issues. Our new target price values the company's shares at 6.2 times our 2008 EPS estimate of $5.50, below peers and the overall market to reflect the risks we see. /J. Corridore