S&P Stock Picks and Pans

S&P Picks and Pans: Cisco Systems, Mastercard, Wal-Mart, NCR, THQ


S&P MAINTAINS HOLD OPINION ON SHARES OF CISCO SYSTEMS (CSCO; 15.84):

January-quarter EPS of $0.28, vs. $0.36, is above our $0.27 estimate, aided by cost management, particularly in R&D. We are encouraged by CSCO's ability to maintain good profitability metrics (25% operating margin) and cash flow generation ($3.2B in the quarter) even in tough economic times. Nevertheless, we remain wary of worsening industry fundamentals, as evidenced by April-quarter guidance for a 15%-20% sales decline to roughly $8 billion, below our $8.7 billion forecast. We lower our fiscal year 2009 (July) EPS estimate by $0.11 to $1.15, and our 12-month target price by $2 to $16, a peer-average 14 times that estimate. -A. Bensinger

S&P MAINTAINS BUY OPINION ON SHARES OF MASTERCARD (MA; 149.39):

MA posts operating EPS of $1.87, vs. $2.26, $0.16 above our estimate. Revenue rose 14%, a slowdown from previous quarters reflecting a decline in purchase volume. This was offset, however, by a 16% drop in expenses from a year ago. Transaction volume increased, reflecting a secular switch to credit cards. Based on continued lower purchase volume and foreign exchange headwinds, we are lowering our 2009 EPS estimate by $0.32 to $10.33. We also reduce our target price by $10 to $160, a below-historical 15.5 times that estimate. -S. Plesser

S&P REITERATES STRONG BUY OPINION ON SHARES OF WAL-MART STORES (WMT; 46.42):

WMT reports January comparable-store sales growth of 2.1%, above our 1.1% expectation. Both WMT U.S. and Sam's Club comparable-sales exceeded our estimates, as traffic improved and consumable categories remained strong. We are disappointed by WMT's decision to halt monthly sales guidance, as it limits our visibility into operations. However, April-quarter comparable-sales guidance of 1%-3% is in line with our 2% estimate. As a result, we are keeping our January-quarter and April-quarter EPS estimates at $0.98 and $0.75. Our 12-month target price remains $58, based on our DCF and p-e analyses. -J. Agnese

S&P DOWNGRADES SHARES OF NCR CORP TO HOLD FROM STRONG BUY (NCR; 10.06):

NCR posts fourth quarter non-GAAP EPS of $0.58 ($0.34 GAAP EPS from continuing operations) vs. $0.54 ($0.52 GAAP), $0.02 below our estimate. Revenue fell 7%, reflecting "macroeconomic turbulence" and weakness at retailers, who are pushing out orders for kiosks further into 2009 while tending not to actually cancel orders. We view NCR as offering a solid value proposition to clients, but we foresee slower near-term sales. We cut our 2009 EPS estimate to $1.00 from $1.80, and 2010's to $1.35 from $2.10. We are lowering our target price to $11 from $18 on revised p-e analysis. -T. Smith-CFA

S&P REITERATES STRONG SELL RECOMMENDATION ON SHARES OF THQ INC. (THQI; 4.14):

December-quarter loss of $2.86, vs. EPS of $0.23, is worse than our EPS estimate of $0.64. Results were hurt by $118M impairment charges, weak consumer spending, higher software amortization and the bankruptcy of Circuit City (CCTYQ). Revenue fell 30% to $357 million, $23 million below our forecast. THQI plans to cut 24% of its workforce, saving $220 million in annual operating expenses. Yet we see demand falling faster than expenses. We widen our fiscal year 2009 (March) loss estimate by $3.69 to loss of $5.23. We lower our fiscal year 2010 EPS estimate by $0.57 to a loss of $0.38 and our target price by $1 to $2.50. -J. Yin

All of the views expressed in this research report accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of analyst compensation was, is or will be, directly or indirectly related to the specific recommendations or views expressed in this research report. Standard & Poor's Regulatory Disclosure

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