Stocks & Markets January 26, 2010, 1:46PM EST

Stock Picks: Apple, Texas Instruments

Plus Wall Street analyst opinions on Cigna and Plains Exploration

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UBS Financial keeps buy; raises estimates

Apple Inc. reported a 50% jump in first-quarter profit after the close of trading Jan. 25, buoyed by holiday orders for the Macintosh and iPhone. Net income advanced to $3.38 billion, or $3.67 a share, as sales increased 32% to $15.7 billion.

On Jan. 26, UBS analyst Maynard Um said that adjusting for Apple's new reporting methodology, first-quarter results were essentially in line with his estimates, though cash flow and Mac sales were much better than he expected. (In September, the Financial Accounting Standards Board approved a change in rules that lets companies record revenue earlier from products that combine hardware and subscription services, such as the iPhone.)

Um noted that the company sees second quarter revenues of $11 billion-$11.4 billion, margins around 39%, and earnings of $2.06-$2.18 a share. With the change in accounting, Um said a key question is "how conservative [the company's] guidance is".

The analyst raised his estimates to show modestly higher margin assumptions and a lower tax rate. He hiked his fiscal 2010 (ending September) EPS projection to $11.82 from $11.68 and his fiscal 2011 estimate to $12.88 from $12.03.

Texas Instruments Inc. (TXN)

R.W. Baird upgrades to outperform from perform

Texas Instruments Inc., the second- largest U.S. chipmaker, said after the close of trading Jan. 25 that fourth-quarter net income rose to $655 million, or 52 cents a share, from $107 million, or 8 cents, a year earlier. Sales jumped 21% to $3.01 billion. The company also said first-quarter profit will be 44 cents to 52 cents a share. Analysts in a Bloomberg survey predicted earnings of 44 cents.

R.W. Baird analyst Tristan Gerra on Jan. 26 upgraded Texas Instruments shares, saying it is "too early to sell ahead of our expectation for an EPS peak" in the 2010 third quarter. Gerra said in a note that recent checks point to "continued lead time extension, highlighting a continued recovery in true end-demand, further pushing out inventory normalization in the channel".

"TI's valuation is very attractive, in our view, following a significant pullback in the shares this month, leading the stock to trade at a discount to the S&P 500 and peers," the analyst wrote.

The analyst also raised a price target on the shares to $30 from $28.