S&P Picks and Pans: Disney, JDSU, Time Warner, AES

Analyst opinions on stocks making headlines in Wednesday's market

From Standard & Poor's Equity Research

S&P MAINTAINS STRONG BUY OPINION ON SHARES OF WALT DISNEY COMPANY

DIS; $30.07

December-quarter operating EPS of 63 cents on 9% fewer shares, vs. 49 cents one year earlier, beat our estimate by 9 cents and the Street consensus by 11 cents. Though a bit hampered by comps on DVD units, we saw stellar results on solid gains with High School Musical 2, Hannah Montana, healthy trends at global theme parks (U.S., Paris, and surprisingly, Hong Kong), plus solid ads at ABC, as well as ESPN. Disney, on its conference call, said U.S. park hotel bookings for rest of fiscal 2008 (Sep.) were tracking slightly ahead of 2007’s record pace, easing some of our concerns on macroeconomic slowdown. Our sum-of-the-parts target price remains $45. /T. Amobi, CPA, CFA

S&P MAINTAINS HOLD OPINION ON SHARES OF JDS UNIPHASE

JDSU; $10.16

Before special items, JDSU posts December-quarter EPS of 17 cents, vs. 11 cents one year earlier, beating our 7 cents estimate. Both sales (up 12% sequentially) and gross margin (up 5% from the preceding quarter to 46%) exceeded our forecasts. While we view results as strong, we believe recent operating margin improvement is not sustainable, given our forecast for a seasonal sales decline in the high-margin test and measurement segment in the March quarter. We are also wary of fluctuating sales growth throughout calendar 2008, reflecting the uneven timing of carrier network rollouts. We are maintaining our 12-month target price at $12. /A. Bensinger

S&P MAINTAINS HOLD OPINION ON SHARES OF TIME WARNER INC.

TWX; $15.40

Before one-time items, fourth-quarter operating EPS of 29 cents, vs. 22 cents one year earlier, matches S&P and Street estimates. We saw mixed AOL division, but key highlights from Time Warner Cable (TWC) , with evident progress on integrating acquired systems, as well as filmed entertainment, fueled by Harry Potter 5, Ocean’s 13, Hairspray, Rush Hour 3, and I Am Legend. Time Warner sees 7%-9% 2008 adjusted EBITDA growth, over $3.6 billion in free cash flow, and $1.07-$1.11 EPS from continuing operations. In his first call as CEO, Jeff Bewkes could offer more insights on the company’s strategic direction. We will update. /T. Amobi, CPA, CFA

S&P MAINTAINS BUY OPINION ON SHARES OF AES CORP.

AES; $19.90

AES announces it has entered into an agreement to sell a 2,250 MW coal-fired power plant and a mine in Kazakhstan for $1.1 billion in initial consideration. Through management fees and bonuses, AES could receive additional proceeds of up to $381 million. The company did not provide details of the price split between the mine and the plant. We see the planned deal as favorable, as it provides AES with a considerable amount of cash that it could use to repay debt or invest in growth projects. We are keeping our 2007 and 2008 EPS ests at $1.00 and $1.16, and our target price at $26. /C. Muir

S&P MAINTAINS HOLD OPINION ON AMERICAN DEPOSITARY SHARES OF AMERICA MOVIL

AMX; $57.60

AMX reports foureth-quarter earnings per ADS of 84 cents, vs 54 cents one year earlier, 10 cents below our estimate. The shortfall was due to higher-than-expected equipment and marketing costs on stronger-than-expected subscriber growth. Revenues were better than expected, as the company added roughly 10 million net new subscribers in the fourth quarter, ending the quarter with 153.4 million in total. Particularly strong was Brazil, with 2.2 million net adds. EBITDA margin of 38.5% rose by 70 basis points from the year-ago period but missed our estimate, in part due to the strong net additions. We will update following this morning’s conference call. /J. Moorman, CFA

S&P UPGRADES RECOMMENDATION ON SHARES OF INVITROGEN TO BUY FROM HOLD

IVGN; $83.43

Fourth-quarter adjusted EPS of $1.04, vs. 82 cents one year earlier, is 11 cents ahead of our view. Sales rose 12% with a 5% forex benefit, and gross margins widened 110 basis points, both better than our forecast on robust growth in BioDiscovery. We are encouraged by the sales growth and margin expansion and expect these trends to continue in 2008, but with stronger growth in the second half. We see moderating sales in cell culture systems, but stable end-markets in spite of some uncertainty in large pharma clients. We raise our 2008 EPS estimate by 22 cents to $4.47, and our target price by $8 to $108 on 1.5X P/E-to-growth. /J. Loo, CFA