Analyst Picks & Pans

Stock Picks: AIG, Burger King, Goldman Sachs, Steel Dynamics


American International Group: Standard & Poor's equity analyst Catherine Seifert maintained a hold recommendation on shares of American International Group (AIG) on June 17. She raised a price target on the shares to $40 from $38.

On June 16, the U.S. Securities & Exchange Commission closed an investigation of Joseph Cassano, the former head of AIG's financial products division, his attorneys said.

Cassano was under investigation as regulators sought to determine whether executives misrepresented the value of AIG's portfolio of "super senior" credit default swaps, which insured bonds tied to the U.S. housing market. The U.S. Justice Dept. and U.K. prosecutors dropped their probes of Cassano and the financial products unit last month.

In a posting on the S&P MarketScope service, Seifert said she expected AIG shares to react positively to unconfirmed media reports that indicated the SEC is not planning to sue Cassano and certain other executives. "We see the resolution of these 'legacy' issues as a positive but still believe there is a high degree of execution risk in AIG's turnaround strategy," Seifert wrote.

Burger King Holdings: UBS Securities equity analyst David Palmer maintained a neutral rating on shares of Burger King Holdings (BKC), the second-largest U.S. hamburger seller, on June 17. He lowered a price target on the shares to $21 from $23.

"We believe that negative sales trends have continued through May and into June, as easier comparisons and recent promotions failed to provide a meaningful sales lift," Palmer wrote in a note. He said he expects that slower sales, combined with rising food costs and unfavorable currency movements, "should keep earnings under pressure" in the near term.

The analyst lowered fiscal 2010 (ending June) fourth-quarter estimates on same-store sales for Burger King's U.S. segment to a decline of 2 percent from an unchanged reading and earnings per share (EPS) to 33¢ from 35¢.

Palmer said he was "disheartened" that Burger King's sales did not to see a more meaningful improvement against "easier comparisons" in May. "While BKC's valuation … makes it an attractive value target, we believe near-term sales concerns will continue to weigh on the stock," he said.

Goldman Sachs Group: Credit Suise equity analyst Howard Chen maintained an outperform rating on shares of Goldman Sachs Group (GS) on June 17. He lowered a price target on the shares to $225 from $235.

"We believe challenging capital markets conditions that began in May have mostly persisted through the first half of June," Chen wrote in a note. He said the overall tone of the fixed-income and credit markets remains "uncertain," while lower client confidence levels and "volatile risky asset price action" have led to a reduction in primary issuance and weaker sales and trading results.

Given the prospects for weaker trading results, lower investment banking revenue, and reduced principal investment gains, Chen lowered a full-year 2010 EPS estimate to $20.00 from $21.00.

"We believe opportunity for market share stability/growth should help sustain earnings and book value growth over the course of the cycle," Chen said. "There's no doubt regulatory/litigation risk now represents a greater risk to our constructive thesis."

Steel Dynamics: Citigroup equity analyst Brian Yu kept a buy rating on shares of Steel Dynamics (STLD) on June 17, with a price target of $22.

On June 16, Steel Dynamics, the fourth-largest U.S. steelmaker, forecast second-quarter earnings that trailed analysts' estimates amid decreased profit margins on recycled metals and lower sales of flat-rolled steel. Earnings-per share will be 20¢ to 25¢, the company said in a statement. Analysts projected profit of 34¢, the average of 12 estimates in a Bloomberg survey.

The company reported per-share earnings of 29¢ a share in the first quarter and a net loss of 8¢ in the second quarter of 2009.

Yu said in a note that the company's second-quarter EPS outlook was below his estimate. He said Steel Dynamics attributed a decline in EPS from the preceding quarter to lower recycling margins due to a mid-quarter fall in scrap metal prices as well as decreased flat-rolled sales and profitability.

The analyst cut an EPS estimate for 2010 to $1.28 from $1.30. He said that with the company's most recent capacity utilization rate above its level in January, and supportive readings from the Institute for Supply Management's manufacturing sentiment surveys, he believes utilization rates should rise by yearend, boosting the company's second-half 2010 mill profitability on higher fixed-cost absorption.

Yu said he would be a buyer of the shares "on any weakness."


Cash Is for Losers
LIMITED-TIME OFFER SUBSCRIBE NOW

Sponsored Financial Commentaries

Sponsored Links

Buy a link now!

 
blog comments powered by Disqus