Analyst Picks and Pans: McKesson, Interpublic, THQ

What Wall Street analysts are saying about selected stocks in the news Wednesday

McKesson Corp. (MCK)

R.W. Baird upgrades to outperform from neutral

R.W. Baird analyst Eric Coldwell said on July 29 that McKesson's second-quarter results strongly exceeded guidance and all targets, and company-specific and market headwinds have abated or are being aggressively addressed. Coldwell noted that distributors' outlooks have been strong across the board, healthcare valuations are recovering, risks are declining, and Wall Street favors McKesson management and the potential catalyst of greater emphasis on healthcare IT.

Coldwell raised his fiscal 2010 (ending March) earnings estimate from $3.90 per share to $4.30, and his fiscal 2011 forecast from $4.32 to $4.65. He raised his $46 price target to $60. With the shares higher on July 29 on the strong results, Coldwell would be a buyer into the mid-$50s.

THQ Inc. (THQI) (THQI)

Lazard Capital Markets keeps hold

Shares of the video game publisher THQ Inc. retreated in premarket trading July 29, hurt by a worse-than-expected sales forecast from the company's fiscal second quarter.

Late July 28, the Agoura Hills, Calif. company projected adjusted revenue of $85 million to $95 million for the three months ending in September. That would mark a decline of at least 37% from the previous year, when the company posted $151.6 million in sales. THQ blamed the decline on the absence of new game releases scheduled for the quarter.

Analysts were expecting $124.2 million, according to a Thomson Reuters survey.

The company also announced Tuesday plans to offer $90 million in convertible senior notes due in 2014. It plans to use the proceeds for general corporate purposes.

Still, THQ's fiscal first-quarter results came in well ahead of projections. The company reversed its year-earlier loss, surprising analysts. Adjusted sales of $233.9 million topped the average forecast of $203.1 million.

Lazard Capital Markets analyst Colin Sebastian told clients in a note July 29 that the company's focus on improving the quality of its games paid off in the most recent quarter. But he kept a hold rating on shares, citing a "cautious industry view" and the lack of new game titles to drive up shares.

Interpublic Group of Companies (IPG)

Wedbush downgrades to neutral from outperform

On July 28, Interpublic reported second quarter earnings of 4 cents per share, down from 17 cents one year earlier, on 14% lower organic revenue. Wedbush analyst James Dix said on July 29 that market share losses that concerned him before contributed to a downside surprise in second-quarter revenues and earnings, and could do so again. Dix said that for Interpublic shares to regain momentum over the next 6-12 months, IPG must address its anemic growth outlook, which reflects reduced scopes of work, and a loss of business from key McCann Worldgroup clients like General Motors and Microsoft.

Dix noted that the company's second-quarter earnings of 4 cents per share missed his 9 cents estimate. He cut his 2009 earnings per share view from 20 cents to 17 cents, and his price target on the stock from $5.75 to $5.50.

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