Picks of the Week: Apple, CA, Chevron, Intel, Nike

Wall Street analysts give their buy, sell, or hold views on 10 stocks in the news this week

Notable Wall Street analyst opinions on stocks in the news for the week of Mar. 8-Mar. 12:

Mar. 8

Hewlett-Packard Co.: Thomes Weisel Partners analyst Doug Reid reiterated his overweight rating on shares of Hewlett-Packard Co. (HPQ) on Mar. 8.

On Mar. 5, the world's largest personal-computer maker revised its first-quarter results, cutting profit by 3 cents a share, after a U.K. lawsuit against its Electronic Data Systems unit increased its legal costs. The new net income figure is $2.25 billion, or 93 cents a share, down from the $2.32 billion, or 96 cents, reported on Feb. 17. Excluding some costs, the profit was $1.07 a share, compared with $1.10 in the earlier report.

Hewlett-Packard increased its legal reserve fund after a London court ordered EDS to make an interim payment of about $112 million to British Sky Broadcasting. The court ruled in BSkyB's favor in a dispute over a services contract between the companies. Justice Vivian Ramsey said EDS was liable for "fraudulent misrepresentation giving rise to damages."

"The revision is unrelated to H-P's strong business performance in the first quarter," the company said in an e-mailed statement on Mar. 5.

"We do not expect the increased contingency reserve to impact our future HPQ EPS estimates", wrote Reid in a Mar. 8 note, because the company has adequate reserves in place, in our opinion". Reid said he believes the current litigation will have no impact on his revenue and EPS growth outlook for the company.

The analyst maintained his second-quarter revenue and non-GAAP EPS estimates of $29.57 billion and $1.04, respectively. Reflecting the restated January quarter results, Reid reduced his full year fiscal 2010 EPS estimate from $4.40 to $4.37. He maintained his revenue and EPS estimates of $128.7 billion and $4.89 for fiscal 2011.

Reid said he estimates that Hewlett-Packard will end the April quarter with a total cash and investment balance of $23.2 billion, vs. his prior estimate of $23.6 billion. "We do not expect the payments to have a material impact on HPQ's cash balance," the analyst wrote.

The analyst has a $60 price target on the shares.

PNC Financial Services Group Inc.: FBR Capital Markets analyst Paul Miller raised his rating on shares of PNC Financial Services Group Inc. (PNC) to outperform from market perform on Mar. 8.

Miller said in a note that the Pittsburgh-based banking company announced on Feb. 2 the sale of $3 billion of common equity and the planned sale of its investment servicing business as part of a capital plan to repay the $7.6 billion TARP investment. Miller said the expected boost to tangible common equity shifted its risk profile "to low risk from medium risk".

"We expect this upgrade to be somewhat controversial due to investor concern surrounding the lower quality of earnings driven by purchase accounting accretion", Miller wrote, which he figured added $3.17 to his $3.63 fiscal 2009 operating EPS estimate. "While we acknowledge that this earnings stream is lower quality," Miller said. The analyst said he believes that nearly $1.50 of this accretion can be recaptured as it stems from higher-cost CDs, which are transitioning into lower-cost core deposits at a rate greater than PNC's initial expectations, and as the non-credit-impaired loan customers refinance or reprice into normal balance sheet loans.

"PNC also has some of the strongest credit metrics relative to peers, which we believe should limit downside risk from current levels," the analyst wrote. He said that if PNC recaptures any of the accretion from the non-credit-impaired portfolio, "it should provide upside to our estimated $5.00 to $6.00 range of 'normal' EPS".

Miller lifted his price target on the shares to $65 from $55.

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