Analyst Picks & Pans

Stock Picks: NYSE Euronext, Aetna


NYSE Euronext (NYX)

Piper Jaffray maintains underweight; lowers price target

Piper Jaffray analyst Robert Napoli maintained an overweight rating on shares of NYSE Euronext, owner of the largest U.S. stock exchange, on Feb.5 in advance of the company's fourth-quarter earnings release on Feb. 9.

The analyst lowered his fourth-quarter earnings per share (EPS) estimate by 4 cents to 48 cents primarily on his expectation of higher expenses for the company, in line with the Wall Street consensus view. He maintained his estimates of $2.21 for 2010 and $2.52 for 2011.

"We believe NYX continues to make progress with its new initiatives and acquisitions, but meaningful success remains elusive and industry pressures, albeit moderating, remain intense," wrote Napoli in a note. "Consequently, we have a hard time seeing positive revenue and earnings growth momentum in the near-term which we need to get to be more bullish on NYX".

The analyst also said the regulatory environment, both domestically and internationally, continues to be "very unsteady" for securities exchanges.

Napoli reduced his price target on the shares to $22.

Aetna Inc. (AET)

Standard & Poor's Equity Research maintains hold

Aetna Inc., the third-largest U.S. health insurer, posted fourth-quarter operating EPS of 40 cents, vs. 96 cents one year earlier, on Feb. 5. Revenues rose 9% from the prior year. The company forecast 2010 earnings excluding some items will drop to a range of $2.55 to $2.65 a share, missing the average estimate of $2.84 a share in a Bloomberg survey of analysts.

S&P equity analyst Phillip Seligman maintained a hold recommendation on Aetna shares on Feb. 5. He said that the company's fourth-quarter operating EPS was in line with his expectation. Seligman noted that Aetna's healthcare operating revenue rose 9% on 7% growth in medical policy membership, while the commercial medical loss ratio (MLR) rose less than he expected on lower flu costs and higher premium yields. For 2010, Seligman said Aetna sees fewer medical members starting Jan. 1, but "we are encouraged [the] decline is less than it expected."

The analyst said he sees a lower commercial MLR on better underwriting, but expected pressure in general and administrative expenses from competitive pricing in the self-funded medical insurance business, higher compensation expense, and internal investment. He kept his 2010 EPS estimate of $2.60 and $33 price target.

Praxair Inc. (PX)

UBS reiterates buy; lowers estimate, price target

UBS analyst Don Carson reiterated a buy rating on shares of Praxair Inc., the largest producer of industrial gases in the Americas, on Feb. 5. He said in a note that the company's 2009 EPS decline "of only 5% mask[ed] the significant volume

leverage that Praxair has to an upturn in global industrial production.

"We expect Praxair to be able to retain its lower fixed cost base as volumes rebound in 2010," he wrote.

Carson trimmed his 2010 EPS estimate by 10 cents to $4.85 to reflect the negative impact of the recent strengthening of the U.S. dollar, and noted that his estimate remains well above Praxair's 2010 EPS guidance of $4.43-4.63, which he views as "cautious". He projects 2011 EPS of $5.25.

The analyst lowered his price target to $91.

NetSuite (N)

Lazard Capital maintains hold; lowers estimates

NetSuite, a maker of relationship management software, reported non-GAAP EPS of 2 cents, vs.1 cent one year earlier, on Feb. 4. Revenues were little changed from the prior year. The company forecast profit excluding some items of 8 cents a share at most this year, trailing the 11-cent average estimate from analysts in a Bloomberg survey.

Lazard Capital analyst Joel Fishbein maintained a hold rating on NetSuite shares on Feb. 5. He said in a note that NetSuite posted a "solid" fourth quarter, but its 2010 EPS guidance of 6 cents to 8 cents was hurt by increased investment in sales and account managers, as well as higher general and administrative costs tied to an upcoming accounting change.

He wrote that a change in revenue recognition at NetSuite adds an "element of confusion" into its 2010 guidance, and that certain factors will ultimately reduce the revenue impact of strong bookings over the past several quarters.

The analyst cut his 2010 estimates for EPS to 6 cents from 12 cents, and for revenue to $182.8 million from $186.3 million.


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