S&P Picks and Pans: Toyota, GE, Phillips-Van Heusen, LDK Solar, Fannie Mae

Analysts' opinions on stocks in the news Wednesday

From Standard & Poor's Equity Research

S&P REITERATES SELL OPINION ON ADSS OF TOYOTA MOTOR (TM; 62.82):

Even as the Detroit 3 seek government assistance to help them through this automotive depression, and as legislators and others ask whether even $25 billion will be enough, and whether it would ever be repaid, there are signs of further deterioration in North American demand. Based on an unconfirmed report in the Wall Street Journal, Toyota, which had recently warned of lower sales and profits, announced plans to cut production and lay off temporary workers. While we see TM as a long-term leader, we find the ADSs unattractive now, based on near-term challenges we see. -E. Levy-CFA

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF GENERAL ELECTRIC (GE; 15.92):

GE says it will restructure its GE Capital business, and plans $2 billion of annual cost cuts at the unit. Not much was quantified, but it is thought that cuts will mostly come from reductions of staff and overhead. GE wants to shrink contributions of its finance arm, and we laud it for taking aggressive action to improve efficiencies at the unit, impacted by the global financial crisis. We still see GE's EPS at $1.96 in 2008 and $1.97 in 2009. But we cut our target price by $7 to $18, 9 times our 2009 estimate, since we think current trends merit historically low valuation. -R. Tortoriello, M. Jaffe

S&P REITERATES HOLD RECOMMENDATION ON SHARES OF PHILLIPS-VAN HEUSEN (PVH; 16.09):

October-quarter operating EPS of $1.10, vs. $1.05, meets our estimate. We continue to see incremental growth opportunities for the Calvin Klein brand and think PVH's moderate-price heritage brands are well positioned to gain marketshare at a time when consumers are seeking out value. But given a promotional retail environment and the negative forex impact of a stronger U.S. dollar, we cut our fiscal year 2009 (January) operating EPS estimate by $0.30 to $3.05 and fiscal year 2010's by $0.50 to $3.25. On significantly lower peer multiples, we reduce our p-e-based target price to $18 from $44. -J. Asaeda

S&P REITERATES HOLD RECOMMENDATION ON ADSS OF LDK SOLAR (LDK; 13.66):

Third quarter earnings per ADS of $0.77, vs. $0.37, beats our $0.76 estimate. Sales rose 11% on greater capacity and higher selling prices. LDK plans to produce 15MT-25MT of polysilicon in the fourth quarter and 5,000-7,000 MT in 2009. We see LDK benefiting from larger scale and vertical integration, but we are wary of execution risk. We think selling prices may fall more in 2009 than LDK forecasts, on slowing demand. We lower our 2008 operating earnings estimate by $0.23 to $2.60 and 2009's by $0.24 to $4.20, on lower gross margins we expect. We reduce our target price by $6 to $17, based on a p-e near peers. -A. Zino-CFA

S&P KEEPS HOLD RECOMMENDATION ON SHARES OF FANNIE MAE (FNM; 0.47):

The New York Stock Exchange has notified FNM that its low share price fails to satisfy the standard for continued listing. FNM says it is working with its conservator to explore options to boost the price, and we expect it will notify the NYSE of its plans by Nov. 26 in order receive an additional six months to comply with the standard. We believe that future losses will force FNM to seek added capital from the Treasury, further subordinating common shareholders, and we are lowering our target price from $1 to $0.50, a significant discount to historical metrics. -K. Cole-CFA