S&P Picks and Pans: Exxon Mobil, Disney, Starbucks, MasterCard, Bristol-Myers Squibb, Tyco

Analysts' opinions on stocks in the news Thursday

From Standard & Poor's Equity Research

S&P RAISES RECOMMENDATION ON SHARES OF EXXON MOBIL TO STRONG BUY FROM BUY (XOM; 81.62):

Q2 operating EPS of $2.28, vs. $1.83, misses our estimate by $0.17, reflecting weak chemical and lower refining results. Oil & gas production declined 7.8%, below our forecast, on Venezuela expropriation, Nigeria labor strike, entitlement impacts, mature field declines and maintenance. We expect about a 2% decline in 2008, before rising in 2009. We trim our 2008 EPS estimate by $0.09 to $9.39, raise 2009 by $0.30 to $9.66, 2010 by $0.44 to $8.38. Blending DCF, NAV and relative valuations, we boost our target price $2 to $105, at expected enterprise value 5.5 times our 2009 EBITDA projection. -T. Vital

S&P MAINTAINS STRONG BUY OPINION ON SHARES OF WALT DISNEY COMPANY (DIS; 30.49):

Shares are down despite what we saw as an encouraging June-quarter, though constrained by 2008 Easter shift at domestic parks, where traffic otherwise seemed to buck slowing economy. Film also weighed on June-quarter, but Wall-E should be reflected starting September-quarter, also likely aided by prior ESPN revenue deferrals, and relatively healthy ad market for ABC. We see upside on High School Musical and Hannah Montana, but financial impact of Disney stores remains unclear. With more macroeconomic risk, but share buybacks and 1.1% dividend yield, we lower our sum-of-parts target price by $5 to $40. -T. Amobi, CPA,CFA

S&P REITERATES STRONG BUY OPINION ON SHARES OF STARBUCKS (SBUX; 14.95):

June-quarter GAAP loss of $0.01, vs. $0.21 EPS, is below our $0.03 EPS estimate. U.S. sales declined more than we expected, and we are trimming our fiscal year 2008 (September) revenue forecast by 1%. Excluding charges, June-quarter EPS was $0.16. For fiscal year 2008 we shift our EPS estimate to an operating basis for comparative purposes and expect $0.75, which implies a GAAP reduction from $0.65 to $0.55. For fiscal year 2009, we lower our revenue forecast by 2%, and our EPS estimate by $0.05 to $1.00. We expect SBUX's restructuring efforts to gain traction in next six months, and we keep our $24 DCF-based target price. -M. Basham

S&P DOWNGRADES OPINION ON SHARES OF MASTERCARD TO HOLD FROM BUY (MA; 246.34):

Before $7.85 per-share charge related to settlement of antitrust litigation with American Express (AXP; 37.50), MA posts second quarter operating EPS of $2.11, vs. $1.85, $0.05 above our estimate. Gross transaction dollar volume growth in the U.S. slowed to 6.2% from 8.9% in the first quarter, reflecting a slowdown in U.S. consumer spending. We believe revenue growth will slow in 2008 and we are lowering our 2008 EPS forecast by $0.09 to $8.65. Based on lower growth assumptions, we are also reducing our 12-month target price by $80 to $285, a peer-premium multiple of 26 times our 2009 EPS estimate of $10.96. -S. Plesser

S&P REITERATES BUY OPINION ON SHARES OF BRISTOL-MYERS SQUIBB (BMY; 21.27):

BMY offers to buy the 83% of Imclone Systems (IMCL; 63.99) that it does not already own for $4.5 billion in cash ($60 per IMCL share). We think proposed deal is strategic plus, since it would gives BMY 100% of U.S. Erbitux profits, up from 40%, plus royalties from foreign sales, and good pipeline. We forecast global sales of rapidly growing oncology drug Erbitux will rise 35% in 2008 to $1.8 billion, and reach $4 billion by 2012. We think the offer, 9 times estimated 2009 IMCL sales, is attractive for BMY relative to recent biotech deals. BMY reconfirmed recent 2008 guidance. We keep our $26 target price. -H. Saftlas

S&P MAINTAINS HOLD OPINION ON SHARES OF TYCO INTERNATIONAL (TYC; 45.24):

June-quarter EPS $0.88, vs. $0.51, before special items, beats our forecast by $0.19. Sales and profit rose in all segments, with biggest profit gains from Electrical and Metal Products, largely on better price for steel tubing. We raise our fiscal year 2008 (September) and fiscal year 2009 EPS estimates by $0.20 each, to $2.95 and $3.25. Prospects seem better for TYC's overall business, but we see it facing economic challenges in U.S. and western Europe, along with the commodity-oriented nature of Electrical and Metal Products. We up our target price $8 to $50, 15 times calendar 2009 estimate, on higher forecasts. -M. Jaffe