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Get Four
|  | JANUARY 17, 2006
 S&P STOCK PICKS & PANS S&P Downgrades Google to SellAnalyst Scott Kessler thinks Google still faces risks such as click fraud and competition. Plus: analysts upgrade Commerce Bancorp, Viacom, Amsouth Bancorp, and moreGoogle (GOOG ): Cuts to 2 STARS (sell) from 3 STARS (hold) Analyst: Scott Kessler Based on our forecasts of modestly stronger revenue growth and better operating leverage, we are raising 2005 and 2006 earnings per share (EPS) forecasts to $5.84 and $7.91, from $5.80 and $7.62. But our 12-month target price stays $428. We think Google still faces notable risks, including revenue concentration, rising competition, and click fraud. Google also announces the proposed purchase of dMarc Broadcasting, a provider of digital solutions for the radio industry, in a deal valued at up to $1.1 billion. Pending approvals, we see a first quarter closing. We think the deal reflects Google's need to diversify. Commerce Bancorp (CBH ): Ups to 4 STARS (buy) from 3 STARS (hold) Analyst: Christopher Muir Fourth quarter earnings per share (EPS) of 36 cents vs. 44 cents misses our estimate by 5 cents. Net interest margin narrowed by 15 basis points and operating expenses increased. But these were more than offset by the impact of growth in average earning assets and strong growth in non-interest income. We are encouraged by the company's continued increase in loans and deposits during 2005 and its position for 2006. We are lowering our 2006 EPS estimate by 16 cents to $1.82 on higher branch opening expenses, and initiating 2007's at $2.26. We are raising our target price by $1 to $39. Viacom (VIA.B ): Ups to 4 STARS (buy) from 3 STARS (hold) Analyst: Tuna Amobi - CPA, CFA We see sustainable double-digit EPS and free cash gains for the "new" VIA.B led by MTV. The pending DreamWorks deal should aid Paramount slate and provide recurring fees from DreamWorks Animation (DWA ). With our view of the underleveraged capital structure, we see financial flexibility for buybacks and acquisitions in the digital space. As VIA.B is now constituted, we see 2006 EPS of $2.12, and over $1.6 billion in free cash flow. Our 12-month target price rises $5 to $50. Amsouth Bancorp (ASO ): Ups to 4 STARS (buy) from 3 STARS (hold) Analyst: Jason Seo, CFA Amsouth Bancorp posted fourth-quarter earnings per share (EPS) of 52 cents, vs. 49 cents, 5 cents above our estimate. Results were aided by higher-than-expected net interest income and non-interest revenues, and partially offset by higher expenses. We are encouraged by the bank's improved net interest margins and strong growth in loans and low-cost deposits, and we believe its expansion plans in the high-growth Florida market will provide additional earnings momentum. We are increasing our 2006 EPS estimate by 10 cents to $2.17. Our 12-month target price rises by $3 to $31. Owens-Illinois (OI ): Ups to 3 STARS (hold) from 2 STARS (sell) Analyst: Stewart Scharf We expect 2006 sales to advance 5%, as increased demand for plastic healthcare containers and closures, as well as price hikes offset modest volume growth for glass containers. We think Owens-Illinois's hedging program and pricing initiatives will offset high (although stabilizing, in our view) raw material costs, while improved productivity efforts should aid operating margins. We project 2005 earnings per share (EPS) of $1.35, and are trimming our 2006 estimate by 5 cents per share to $1.50. Our 12-month target price rises by $9 to $23. Silgan Holdings (SLGN ): Ups to 2 STARS (sell) from 1 STAR (strong sell) Analyst: Stewart Scharf We project low single-digit sales growth in 2006 on soft demand for metal food containers. Gross margins may widen slightly on increased demand for higher-margin closures, while price pass throughs should offset high but, in our view, stabilizing resin costs. Our 12-month target price rises by $9 to $32. Boston Scientific (BSX ): Reiterates 3 STARS (hold) Analyst: Robert Gold In an extension of the protracted battle for Guidant (GDT ), Boston Scientific offers to purchase the company for $27 billion, or $80 a share, about a $2.5 billion increase over its previous offer, and $3.3 billion ahead of the most recent bid from Johnson & Johnson (JNJ ). The new offer includes a $1.4 billion investment in Boston Scientific common stock by Abbott Labs (ABT ), an additional $200 million loan (for a total of $900 million) from Abbott Labs at 4%, and the purchase by Abbott Labs of Guidant's stent and endovascular units for $4.1 billion upfront, vs. the original $3.8 billion. We will update after further reviewing the specifics.  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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