S&P Stock Picks and Pans

S&P Picks and Pans: Yahoo, Wells Fargo, AT&T, E*Trade, Legg Mason


S&P REITERATES BUY OPINION ON SHARES OF YAHOO INC. (YHOO; 11.34):

Adjusting for notable non-recurring items, YHOO posts fourth quarter EPS of $0.17, vs. $0.13, $0.07 above our forecast. Revenues excluding traffic acquisition costs fell 2%. However, revenues from owned and operated sites rose 6%, with search generating growth of 11%. Sales and marketing and G&A expenses dropped 24% and 21%, respectively, as employee count fell 11% from the third quarter. Given the macro environment and company-specific challenges, we think YHOO executed well. Nonetheless, with such conditions, we are lowering our 2009 EPS estimate to $0.46 from $0.50, and our target price to $18 from $20. -S. Kessler

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF WELLS FARGO (WFC; 19.07):

WFC posts fourth quarter operating loss of $0.79, vs. year-ago EPS of $0.41, $1.16 below our estimate. Fourth quarter contained several charges related to the Wachovia acquisition, including a $3.9 billion reserve build to bring WB's reserve methodology in line with WFC's standards. Excluding the reserve build, we calculate that WFC was moderately profitable in the fourth quarter. Assuming credit metrics deteriorate throughout the year, we are lowering our 2009 EPS estimate by $0.20 to $1.65. As a result, we reduce our target price by $11 to $21, an above-peers 12.7 times that estimate and roughly 1.7 times tangible book value. -S. Plesser

S&P MAINTAINS STRONG BUY OPINION ON AT&T SHARES (T; 25.93):

Before one-time items, AT&T posts fourth quarter EPS of $0.64, vs. $0.71, below our $0.68 estimate that assumed lower depreciation. Revenue was slightly lower than our view, but EBITDA was higher even with upfront expenses for successful 3G iPhone and overall strong wireless growth. Consumer voice remains weak and regional business was down fractionally, though we are pleased Uverse gained traction. AT&T's 2009 guidance for slight revenue growth, higher pension expenses, and capex control is consistent with our thesis, but we look to morning call for clarity on margin trends amid economic slowdown. -T. Rosenbluth

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF E TRADE FINANCIAL (ETFC; 1.18):

Fourth quarter loss of $0.50, vs. $3.98 loss, is wider than our $0.15 loss estimate. Loan loss provisions of $513 million exceeded our estimate of $350 million. We applaud ETFC's aggressive reserving, but believe that it needs more capital to ease investor uncertainty. There was no news regarding ETFC's TARP application, which we find worrisome. However, we are encouraged that ETFC's retail side is holding its own against competitors, despite the overall uncertainty. We widen our 2009 estimated loss to $0.37 from $0.16 on further weakness in ETFC's home equity loan book. We keep our target price at $2.50. -R. Pandya

S&P KEEPS HOLD RECOMMENDATION ON SHARES OF LEGG MASON (LM; 19.44):

December-quarter loss of $10.55, vs. EPS of $1.07, is wider than our $3.81 loss estimate, and includes an intangible impairment, a loss on a structured investment vehicle (SIV) security sale, and other SIV support costs. Managed assets fell 17% sequentially, with $77 billion in outflows; performance must improve before it can stem outflows, in our view. We widen our fiscal year 2009 (March) loss per share estimate to $11.15 from $4.05, and reduce our fiscal year 2010 EPS view by $1.46 to $1.77. We think earnings outlook is clouded by SIV troubles. We cut our target price by $3 to $20, a discount to LM's book value. -M. Albrecht

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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