S&P Stock Picks and Pans

S&P Picks and Pans: Toyota, Bank of America, Verizon, Pitney Bowes, Fred's


S&P REITERATES SELL OPINION ON ADSS OF TOYOTA (TM; 68.81):

December-quarter net loss of JPY 165B, vs. net income of JPY 459B, is wider than our JPY 132B loss forecast, largely reflecting currency translation and sharply lower global volume. Being the sales leader means not being able to hide from a global sales decline. We recently reduced our U.S. and global industry sales estimates. Year-to-year January volume declines for TM of more than 30% and 20% in the U.S. and Japan bode poorly for March-quarter results, and we now project a loss for FY 2009 (March). We see TM as a long-term leader, but given near-term pressure, our opinion remains sell. -E. Levy-CFA

S&P MAINTAINS HOLD OPINION ON SHARES OF BANK OF AMERICA (BAC; 4.84):

Shares vacillated yesterday, trading down to $3.77, but closing up 3%. Behind this, we think, was a swing in investor sentiment about possible nationalization, as stated in unconfirmed DJ report. We believe this should be an option of last resort. With Tier 1 capital at 9.15%, and barring a significant loss in customer confidence, BAC's capital seems adequate at present. We think BAC should be given a chance to build back shareholder equity. We also see nationalization of BAC pressuring other bank stocks, which may require additional government capital to prop their shares up. -S. Plesser

S&P MAINTAINS BUY OPINION ON VERIZON COMMUNICATIONS SHARES (VZ; 31.03):

VZ announces that its CFO Doreen Toben will retire in mid-2009 and the company will name a new CFO shortly. We are somewhat surprised by the news, particularly as it appears to us that VZ did not have a clear succession plan in place. Under Toben, we contend VZ's financial profile was strong, with industry-leading wireless EBITDA margin, capital spending focused on fiber TV and 3G network buildout, a high-quality balance sheet, and an above-average dividend yield. We believe these strengths will help VZ to withstand the macroeconomic pressures that we forecast for 2009. -T. Rosenbluth

S&P REITERATES HOLD RECOMMENDATION ON PITNEY BOWES SHARES (PBI; 23.96):

PBI posts Q4 non-GAAP EPS of $0.77 (GAAP $0.45 on continuing operations), vs. $0.72 (GAAP loss $0.31 per share), which is above our $0.71 estimate. Revenues fell 7%, or about 2% on a constant currency basis. We believe the company is taking appropriate defensive actions to confront a flattish sales environment (excluding currency effects). PBI has been reducing long-term debt, slowing share buybacks, and restructuring. It raised its quarterly cash dividend by 3%. We lower our 2009 operating EPS estimate to $2.65 from $2.85, and our target price to $24 from $25. -T. Smith-CFA

S&P LOWERS RECOMMENDATION ON SHARES OF FRED'S INC TO SELL FROM HOLD (FRED; 10.15):

FRED sees January-quarter EPS of $0.15-$0.18, significantly below our $0.28 estimate. Comparable-store sales declined 1.1%, below our projection that they would be flat. We see increased consumer pessimism resulting in reduced consumer spending and a heightened sensitivity to pricing. With our view that adverse economic environment will persist at least through mid-year, we are reducing our FY 2010 (January) EPS estimate by $0.15 to $0.63. As a result, we lower our 12-month target price by $3 to $9, based on updated comparative and forward 12-month p-e analyses. -J. Agnese

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

Any advice, analysis, or recommendations contained in articles labeled "Insight from Standard & Poor's" reflect the views of Standard & Poor's, which operates separately from and independently of BusinessWeek Online. It is possible that BWOL may from time to time publish information that is not consistent with advice, analysis, or recommendations that are published by Standard & Poor's. Standard & Poor's and BusinessWeek Online are each units of The McGraw-Hill Companies, Inc.


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