S&P Picks and Pans: Dell, D.R. Horton, Ethan Allen, Suez

Analyst opinions on stocks making headlines Friday

From Standard & Poor's Equity Research

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF DELL

DELL; $28.46

Dell posts July-quarter preliminary EPS of 32 cents vs. 22 cents, above our 29 cents estimate. Revenues rose 5%, reflecting strength in enterprise and service segments. Margins were aided by low component costs. We expect cross-currents of costs and savings as the company tries to reposition itself to aim at indirect sales channels. We are raising our EPS estimates to $1.36 from $1.30 for fiscal 2008, and to $1.60 from $1.35 for fiscal 2009. After applying our unchanged target p-e multiple of 21 times to our 12-month forward EPS estimate of $1.48, we are raising our 12-month target price to $31 from $28. /T. Smith-CFA

S&P REITERATES SELL OPINION ON SHARES OF D.R. HORTON

DHI; $15.10

After further review of June-quarter results, we estimate net tangible book value to be near $16.50, excluding goodwill and land held for future development that we believe is likely to be written off. The company took $836 million for inventory impairments and $426 million for goodwill in the March quarter. However, we see more homesite inventory impairments and contract cancellations ahead. We are lowering our 12-month target price to $13 from $15, just under 0.8 times our estimate of asset value. This is near the low end of Horton's historical range, but for this large homebuilder, still at a premium to peers. /K. Leon-CPA

S&P UPGRADES OPINION ON SHARES OF ETHAN ALLEN INTERIORS TO BUY FROM HOLD

ETH; $33.48

With consumer spending rebounding in July, according to today's Commerce Dept. report, we believe Ethan Allen can realize mid- to high-single-digit revenue growth in fiscal 2008 (June). With interest rates likely to be flat or lower, we believe consumer spending on home furnishings will remain stable. We think Ethan Allen has become a strong brand name in the home furnishings market with a focused strategy of selling merchandise that combines high quality with good value. We derive our 12-month target price of $40 by applying a p-e of about 15 times, below its historical range and near peers. /K. Leon-CPA

S&P MAINTAINS HOLD RECOMMENDATION ON AMERICAN DEPOSITARY SHARES OF SUEZ SA

SZE; $57.09

Following unsubstantiated market speculation surrounding the proposed merger between Suez and Gaz de France, unconfirmed reports on Reuters.com say that Suez has reached a deal with the French government to spin off about 66% of its environmental unit. However, according to the report, a final deal has not been reached and discussions are ongoing. French President Sarkozy had said he would not approve the merger unless Suez sold the environmental business. We are raising our 12-month target price by $4 to $57 based on our view of increased odds that the merger will be completed. /C. Muir