S&P Stock Picks and Pans

S&P Picks and Pans: Amgen, St. Jude Medical, Verizon, American Express, DuPont


S&P DOWNGRADES SHARES OF AMGEN TO HOLD FROM BUY (AMGN; 53.08):

Fourth quarter EPS of $1.04, vs. $0.97, is in line with our estimate. Revenues were $80M below our forecast, offset by lower-than-expected expenses. AMGN sees flat 2009 revenue growth, with EPS gains from costs control. We maintain our view of denosumab as key share-price driver and expect news in the second half 2009. But while positive on d-mab, strong cash flows and cost leverage, we are increasingly wary of competitive pressure across AMGN portfolio, which we may limit top-line sales growth. We cut our 2009 EPS estimate by $0.07 to $4.55, and lower our target price by $9 to $60 on p-e analysis. -S. Silver

S&P UPGRADES OPINION ON SHARES OF ST. JUDE MEDICAL TO STRONG BUY FROM BUY (STJ; 31.68):

Fourth quarter operating EPS of $0.60, vs. $0.54, is $0.02 better than we expected. Revenues were hurt by a rising U.S. dollar, but ex-currency sales growth of 14% was the best performance of the year, with strength evident across all product categories. We believe currency will remain a risk to revenues and gross margins, but we are impressed with the inelastic demand characteristics of product lines amid sharp economic slowdowns. We are keeping our 2009 EPS estimate at $2.50, but raising our 12-month target price by $8 to $40, based on forward p-e-to-growth of 1.2, modestly above peers. -R. Gold

S&P MAINTAINS BUY OPINION ON VERIZON COMMUNICATIONS SHARES (VZ; 30.99):

Before one-time items, VZ posts fourth quarter EPS of $0.61, vs. $0.62, $0.03 below our forecast. Revenues were lighter, with greater pressure on wireline than we expected, while wireless exhibited double-digit growth due to strong customer growth and data services. Operating margin was wider, even with higher depreciation expense; we think the EPS miss is due in part to high interest expenses from an acquisition. We look to VZ's morning call for indications if the margin expansion that we forecast is sustainable. Our 12-month target price is $35, aided by a 6% dividend yield. -T. Rosenbluth

S&P MAINTAINS SELL OPINION ON SHARES OF AMERICAN EXPRESS (AXP; 15.20):

After $0.24 reengineering charges, AXP posts fourth quarter operating EPS of $0.21, vs. $0.71, $0.01 above our estimate. Revenue declined 11%, reflecting lower spending levels and adverse currency conditions. We are wary of AXP's provision expense, which declined 3% amid rising charge-offs. The company claims that comparisons are against elevated levels in 2007; we think rising charge-offs will necessitate higher provisions in the quarters ahead. We are maintaining our 2009 EPS estimate of $1.55. Our target price remains $14, a below-historical 9 times our 2009 EPS estimate. -S. Plesser

S&P MAINTAINS SELL OPINION ON SHARES OF DUPONT (DD; 23.18):

Fourth quarter loss of $0.28, before $0.42 restructuring charge, vs. EPS of $0.57 is wider than our $0.25 loss estimate. Sales fell 17%, as demand weakened by 20% across all regions; trends we see as likely to continue well into 2009. Results were hurt by raw material cost rises exceeding price hikes. Full 2008 EPS was $2.78, vs. $3.28. We are cutting our 2009 EPS forecast by $0.25 to $2.25, due to about $0.40 of greater pension costs and the impact of a strong U.S. dollar, partially offset by restructuring savings, lower raw material costs and gains in agricultural. Our target price stays $20. -R. O'Reilly-CFA

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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