S&P Picks and Pans: Oracle, Google, RIMM, BUD, Lennar

Analyst opinions on stocks making headlines in Thursday's market

From Standard & Poor's Equity Research

S&P MAINTAINS STRONG BUY RECOMMENDATION ON SHARES OF ORACLE CORP.

ORCL; $22.55

May-Q operating EPS of $0.46 vs. $0.36 is $0.02 above our estimate. Sales grew 24% to $7.28B, above our $6.86B view, helped by solid execution, acquisition of BEA Systems, and favorable forex. Licenses rose 27% to $3.14B, $260M above our view. Non-GAAP operating margins widened to 49%. We think May-Q results show benefits of ORCL's market position, geographic diversity and considerable operating leverage, factors we think are ORCL-specific. We lift our FY 09 (May) EPS forecast by $0.02 to $1.48, but keep our $27 target price, based on a blend of intrinsic and relative measures. /Z. Bokhari

S&P REITERATES HOLD OPINION ON SHARES OF GOOGLE INC.

GOOG; $551.00

GOOG announces Patrick Pichette will become its CFO beginning Aug. 12. Pichette was most recently President of Operations at Bell Canada unit of BCE (BCE 37.11) , and also previously served as its CFO. While we think Pichette seems like a decent choice, we wonder why GOOG took so long to find a replacement for George Reyes, who was announced as retiring in Aug. '07. We also expected the new CFO to have more of a tech and/or media-related background. But we think Pichette's telecom experience may prove helpful as GOOG builds infrastructure and pursues a mobile strategy. /S.Kessler

S&P MAINTAINS HOLD OPINION ON RESEARCH IN MOTION SHARES

RIMM; $142.34

Shares are indicated lower after RIMM posts May-Q EPS of $0.84 vs. $0.39, in line with our estimate, aided $0.02 by tax benefit. Revenues more than doubled on smartphone adoption by consumers, but were slightly below our forecast. Operating margin was a bit lighter than expected and RIMM's Aug-Q guidance, below our prior EPS forecast, reflects a spike in SG&A costs to promote brand. We are cutting our FY 09 (Feb) EPS estimate by $0.09 to $3.70. But we are raising our target price by $2 to $130, a premium-to-peers P/E of 35X to reflect our view of stronger relative prospects. /T. Rosenbluth

S&P MAINTAINS SELL RECOMMENDATION ON SHARES OF RED HAT

RHT; $22.30

RHT posts May-Q EPS of $0.08 vs. $0.07, $0.02 below our estimate. Revenue rose 32% to $157M, $3.7M above our forecast, driven by the latest release of Red Hat Enterprise Linux, high customer renewal rates and increased adoption for RHT's JBoss middleware products. However, earnings were hurt by higher marketing expenses and stock-based compensation. Although RHT sees steady demand, we are trimming our FY 09 (Feb.) EPS projection by $0.05 to $0.42 on higher investments and lower interest income, and our 12-month target price by $1 to $19 on our reduced earnings outlook. /J. Yin

S&P MAINTAINS HOLD OPINION ON SHARES OF ANHEUSER-BUSCH COMPANIES INC.

BUD; $61.76

According to an unconfirmed WSJ report, BUD is prepared to reject InBev's $46B cash, or $65/share, buyout offer as too low and offer its own strategic plan, which would include expansion of its cost-cutting plan to about $1B over next 4 years from the existing $500M plan. BUD is also expected to announce it is reviewing the option of selling non-core assets. We still believe a sale to InBev is the best means to realize shareholder value and think InBev's reminder yesterday that it has secured financing shows commitment to seeing a deal completed. We keep our $65 target price. /E. Kwon, CFA

S&P MAINTAINS HOLD OPINION ON LENNAR SHARES

LEN; $14.57

LEN posts May-Q loss of $0.76 vs. $1.55 loss, after write-offs of $137M related to valuation adjustments and land option contracts, wider than our $0.35 loss estimate. The write-offs are nearly double the charges taken in Feb-Q, which is disappointing since we expect most builders to show easing of these charges for the rest of '08. Total May-Q revenues fell 61%, new orders dropped 45% and the cancellation rate was 22%. On a positive note, new orders and deliveries rose sequentially, but LEN says the rest of '08 may show weakness. We will update after 11:00 AM conference call. /K. Leon, CPA