S&P Picks and Pans: Deere, Tiffany, BCE, Dillard's, Bank of America, Maguire Properties

Analysts' opinions on stocks in the news Wednesday

From Standard & Poor's Equity Research

S&P REITERATES HOLD RECOMMENDATION ON SHARES OF DEERE & CO. (DE; 29.99):

Shares are down sharply today after DE posts October-quarter EPS of $0.81, vs. $0.94. This falls short of our estimate of $0.97, hurt by $35 million costs of closing a factory, higher raw material costs from contract lags, increased SA&G and R&D expenses. Results were aided by a lower share count. We expect ongoing healthy demand for agricultural equipment amid strong global grain prices, but see other segments impacted by a continued weak U.S. housing market. We reduce our fiscal year 2009 (October) EPS estimate by $0.20 to $4.65, and our target price by $2 to $36, 7.7 times that estimate, in line with peers. -A. Compton

S&P REITERATES HOLD OPINION ON SHARES OF TIFFANY & CO. (TIF; 20.47):

October-quarter operating EPS of $0.35, vs. $0.21, misses our $0.42 estimate. Following a sharp decline in October, U.S. sales have softened further in November, with TIF guiding domestic same-store sales down 25%-35% in the January-quarter. With U.S. shoppers retrenching and international markets also expected to weaken, we see operating margins narrowing on reduced store productivity and difficulties leveraging fixed costs. As a result, we cut our fiscal year 2009 (January) operating EPS estimate by $0.45 to $2.35 and fiscal year 2010's by $0.65 to $2.20. We lower our p-e-based target price by $6 to $24. -M. Driscoll-CFA, J. Asaeda

S&P MAINTAINS HOLD OPINION ON SHARES OF BCE INC. (BCE; 31.30):

We expect BCE shares to open lower today on concerns that its pending private equity transaction may not close as planned in mid-December. Independent reviewer KPMG said that, based on current market conditions and the high debt load involved, its preliminary opinion questions BCE's solvency post closing an LBO. BCE is reviewing the assessment, and in our view may need to take a lower purchase price including less debt. BCE, which has firm financing commitments in place, has traded most of 2008 at above-peer p-e and enterprise value/EBITDA multiples, reflecting the cash offer. -T. Rosenbluth, A.Bensinger

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF DILLARD'S INC. (DDS; 3.35):

October-quarter operating loss per share of $0.59, vs. $0.21 loss, is a penny wider than our estimate. Given a tough retail environment, we see DDS taking higher markdowns during the current quarter in order to end fiscal year 2009 (January) with a cleaner inventory position. We continue to project narrower losses next year on more effective inventory and expense management. We widen our fiscal year 2009 operating loss per share estimate to $1.06 from $0.83 but keep our forecast of fiscal year 10's loss per share of $0.65. We lower our 12-month target price by $1 to $4 on a revised peer enterprise value-to-EBITDA valuation. -J. Asaeda

S&P MAINTAINS BUY OPINION ON SHARES OF BANK OF AMERICA (BAC; 14.15):

BAC's shares have dropped sharply over the last month. In our opinion, this partly reflects troubles at Citigroup (C; 6.32, hold), and also the likelihood of further stress on the U.S. consumer. With shares now selling at less than 50% of book value, we think these concerns are already baked into in today's share price. We note that unlike Citi, BAC has not had an unprofitable quarter throughout the credit crisis. Still, we are lowering our target price by $6 to $25, a below-historical 9.8 times our 2009 EPS estimate of $2.56, justified by uncertainty about the extent of credit defaults. -S. Plesser

S&P UPGRADES OPINION ON SHARES OF MAGUIRE PROPERTIES TO HOLD FROM SELL (MPG; 1.46):

MPG shares have fallen precipitously in 2008, losing more than 90% of their value. We remain concerned about high debt service and low occupancy levels at its Orange County, California, assets. We lower our 12-month target price by $1, to $2, in order to reflect updated calculation of net asset value, based on recent transactions and a one-year cash yield of 6.5%. However, we think the shares now fairly reflect the underlying value of the trust's assets. Also, outstanding debt is largely secured by individual assets and is non-recourse to the trust. We would hold MPG shares. -R. Shepard