S&P Stock Picks and Pans

S&P Picks and Pans: State Street, RIM, J&J, Logitech, New York Times, Barclays


S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF STATE STREET CORP (STT; 18.80):

Fourth quarter operating EPS of $1.18, vs. $1.38, is $0.05 above our estimate. STT shares are down sharply today, reflecting a signficant increase in losses in the company's investment and conduit portfolios. Its tangible book value continues to decline, to roughly $10.00 in fourth quarter, vs. $15.40 in third quarter. Although its Tier-1 capital ratio is strong at 20.5%, STT's 4.4% tangible capital levels are low, in our opinion, and only 1.05% if its conduit is consolidated. We think STT will ultimately need to raise equity. We cut our target price by $30 to $20, a below-historical 2.0 times tangible book value. -S. Plesser

S&P DOWNGRADES OPINION ON RESEARCH IN MOTION SHARES TO HOLD FROM BUY (RIMM; 51.11):

While RIMM only partially recaptured its late 2008 losses, shares are up 33% since November-quarter results reflecting the negative impact of a late product launch. RIMM's guidance for February-quarter indicated to us that the sales pipeline is projected to be robust, but there will be gross margin pressure. While RIMM's results to date do not appear to have been hurt by slackened demand for consumer electronics and the impact of workforce reductions in the key financial services vertical, we see these as risks. We keep our 12-month target price of $51, based on a p-e of 14 and a p-e-growth of 0.9. -T. Rosenbluth

S&P LOWERS OPINION ON JOHNSON & JOHNSON SHARES TO BUY FROM STRONG BUY (JNJ; 57.17):

Fourth quarter operating EPS of $0.94, vs. $0.88, is $0.01 above our estimate. Revenue fell 4.9% after 3.9% forex hit. Drug sales fell 11% and medical device sales 1.9%, while consumer sales rose 1.2%. After some $0.03-$0.05 dilution from Mentor acquisition, JNJ sees 2009 EPS of $4.45-$4.55, vs. 2008's $4.55. While we note JNJ's lead positions in key healthcare markets, and robust R&D pipeline, we see 2009 results impacted by forex, weak economies, and greater competition. We lower our target price by $10 to $65, a peer-level p-e of 14.4 times on our $4.50 2009 estimate, cut $0.22. Dividend yield 3.2%. -H. Saftlas

S&P LOWERS OPINION ON SHARES OF LOGITECH TO SELL FROM HOLD (LOGI; 11.35):

LOGI posts December-quarter EPS of $0.22, vs. $0.71, below our estimate of $0.50. Revenue fell 16%, reflecting a downturn in consumer demand for PC peripherals, reluctance by retailers to hold inventory, and negative currency effects. Inventory at LOGI rose 4.9% from September-quarter, 34% from a year ago, and margins narrowed sharply. A restructuring plan is underway that is likely to cut about 550 to 600 staff. Excluding restructuring charges, we lower our EPS estimates to $0.96 from $1.35 for fiscal year 2009 (March), and to $1.00 from $1.55 for fiscal year 2010. We are reducing our 12-month target price to $10 from $17. -T. Smith-CFA

S&P MAINTAINS SELL RECOMMENDATION ON SHARES OF NEW YORK TIMES (NYT; 6.21):

NYT has entered into two private financing agreements for a total of $250 million in senior unsecured notes due 2015 with detachable warrants. Carlos Slim Helu and his family are the main shareholders of the companies which lent the funds and currently hold 6.9% of NYT's Class A shares. The notes have a coupon of 14.053%, of which 3% can be paid in kind. The deal relieves some pressure on NYT to line up financing ahead of the May 2009 expiration of a $400 million revolving credit agreement, but at a high cost. We cut our 2009 EPS est $0.07 to $0.46 but keep $4 target price. -L. Braverman, CFA

S&P MAINTAINS HOLD RECOMMENDATION ON ADSS OF BARCLAYS PLC (BCS; 4.29):

BCS says it knows of no justification for the 25% drop in its share price on Friday, Jan. 16, and we note that the ADSs are off sharply this morning. We believe BCS's comment may imply that it continues to value leveraged loan and similar positions on the basis that it will ultimately receive close to par value, rather than at the current distressed prices implied by marking to market. BCS also expects to report a pretax profit for 2008 well ahead of market consensus of GBP 5.3 billion; and we project GBP 6.18 billion. We maintain our earnings estimates and target price. -D. Chambers

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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