Analyst Picks & Pans

Stock Picks: Exxon Mobil, Lexmark


Exxon Mobil Corp. (XOM)

UBS Securities keeps neutral; lowers price target

Exxon Mobil Corp., the largest U.S. company, posted a smaller decline in fourth-quarter profit than analysts estimated on Feb. 1. Net income fell 23% to $6.05 billion, or $1.27 a share, from $7.82 billion, or $1.54, a year earlier.

UBS Securities analyst William Featherston maintained a neutral rating on the shares on Feb. 2. He said in a note that the company's earnings per share (EPS) of $1.27 exceeded the Wall Street consensus estimate of $1.19 and the UBS projection of $1.12 on lower than expected corporate expense and a lower tax rate.

"After underperforming throughout 2009, XOM lagged peers by another 600 basis points after disclosing the XTO acquisition" in December, the analyst wrote. "In the wake of being oversold, today's better than expected EPS ... coupled with better organic upstream growth in 2010 should firm XOM's relative share performance."

Featherston said Exxon's large valuation premium relative to its peers and the S&P 500 index warranted a neutral rating. He reduced his price target on the shares to $72 from $75.

Lexmark International Inc. (LXK)

Standard & Poor's Equity Research maintains buy; raises estimates, price target

Lexmark International Inc., the second-largest U.S. printer maker, posted fourth-quarter revenue of $1.07 billion on Feb. 2, topping analysts' projections. Net income in the fourth quarter more than tripled to $59.8 million, or 76 cents a share, from $18.1 million, or 23 cents, a year earlier. Excluding 40 cents of restructuring and other charges, earnings per share (EPS) were $1.16. The company said it expects first-quarter earnings will be at least 80 cents a share.

S&P equity analyst Thomas Smith maintained a buy rating on the shares on Feb. 2. Smith said fourth quarter EPS excluding charges was well above his 60 cents estimate. He noted that revenue fell 1% from a year ago, but rose 12% from the previous quarter as customer demand accelerated following a printer industry downturn.

Smith said he expects improving industry conditions through 2010, with margins widening based on new products, higher volumes, and cost reduction programs. He raised his operating EPS estimate to $3.20 from $2.40 for 2010, and raised his 12-month price target to $35 from $31.

PNC Financial Services Group Inc. (PNC)

Stifel Nicolaus maintains hold; adjusts estimates

Bank of New York Mellon Corp. (BNY) agreed on Feb. 2 to buy PNC Financial Services Group Inc.'s global investment-servicing business for $2.31 billion to add hedge-fund and mutual-fund clients. Pittsburgh-based PNC expects a gain of about $500 million and an increase in Tier 1 common capital of $1.6 billion after the deal is completed in the third quarter.

Stifel Nicolaus analyst Christopher Mutascio maintained a hold recommendation on PNC shares on Feb. 2. In a note, the analyst said he believes the transaction will be slightly dilutive to PNC's earnings at around 10 cents per share annually. He reduced his 2010 and 2011 EPS estimates to $3.40 and $5.05 from $3.45 and $5.15, respectively.

"Given the lack of guidance from the U.S. Treasury as to TARP repayments and capital ratio guidelines, it is difficult to determine just how much this transaction will impact a potential common capital raise from PNC to repay TARP," Mutascio wrote.

Hologic Inc. (HOLX)

Brean Murray upgrades to buy from hold; raises estimates, sets price target

Hologic, a manufacturer of medical imaging systems, and diagnostic and surgical products, reported first quarter non-GAAP earnings per share (EPS) on Feb. 1 of 29 cents on a 3.9% decline in revenues drop. The company sees revenue of $410 million-$415 million in the second quarter, with non-GAAP EPS of about 29 cents. The company raised its fiscal 2010 revenue view to $1.64 billion-$1.665 billion, and sees $1.16-$1.20 non-GAAP EPS.

Brean Murray analyst Jose Haresco upgraded his recommendation on the shares to buy from hold on Feb. 2. Haresco said in a note that the company's first-quarter revenue of $412.4 million was better than his $399 million estimate and the $403 million consensus forecast of Wall Street analysts. He noted that strength came from the company's breast health business. The analyst also said he believes the breast health business is set for a rebound as improvement in capital spending drive sales volumes and average selling prices.

Haresco raised his EPS estimates for fiscal 2010 to $1.24 from $1.18, and for fiscal 2011 to $1.37 from $1.23. He set an $18 price target on the shares.


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