S&P Picks and Pans: Mastercard, Viacom, Yahoo, PPL, Marvel Entertainment

Analysts' opinions on stocks in the news Tuesday

From Standard & Poor's Equity Research

S&P MAINTAINS HOLD OPINION ON SHARES OF MASTERCARD (MA; 160.34):

Before a $515 million antitrust litigation settlement, MA posts third quarter operating EPS of $2.47, vs. $2.31, $0.17 above our estimate. Revenue rose 24%, reflecting a 12% growth in purchase volume and a 13% increase in transactions. We expect revenue growth to decline going forward due to economic difficulties. MA's results reflect the strong operating leverage of its business model; expenses rose only 8.3%. We expect the company to report 2008 EPS of $8.90, We are increasing our 12-month target price to $175, a below-historical 19.7 times our 2008 EPS estimate. -S. Plesser

S&P MAINTAINS STRONG BUY OPINION ON CLASS B SHARES OF VIACOM (VIAB; 20.91):

Before $0.07 tax benefit and on 7% less shares, third quarter EPS of $0.55, vs. $0.65, misses our estimate by $0.05 but was in line with Street. As pre-announced, U.S. ads fell 3%, with likely more weakness ahead. third quarter showed tough film comps vs. '07's Transformers, partly offset by strong international ads, worldwide affiliate fees, Rock Band games (over 7M units to date). We see strong Q4 DVDs (Iron Man, Indiana Jones 4, Panda). Chairman Redstone again said he plans no more sale of shares, amid talks between lender and Redstone's National Amusements. We keep PEG-based target price of $25. /T. Amobi - CPA, CFA

S&P REITERATES BUY OPINION ON SHARES OF YAHOO (YHOO; 12.93):

In an unconfirmed report, the WSJ indicates that YHOO and Google (GOOG; 352.21, Strong Buy) sent the Justice Dept. a revised search-advertising agreement. The new pact would add a 25% limit on the percentage of YHOO's search revenues generated from the deal, reduce its length to two from 10 years, and enable GOOG advertisers to choose not have their ads displayed on YHOO properties. We think these alterations increase the chance of passing DoJ muster, but also reduce the possible benefits. Without a DoJ okay, we think YHOO would look to partner with Microsoft (MSFT; 23.11). -S. Kessler

S&P DOWNGRADES SHARES OF PPL CORP TO HOLD FROM BUY (PPL; 29.00):

PPL shares down 11% this morning on sharply reduced outlook. The company reports third quarter operating EPS of $0.45 vs. $0.72, $0.16 below our estimate, hurt by a drop in wholesale energy margins and outages at two coal plants. We are reducing our 2008 EPS estimate $0.25 to $2.05, and based on expected rise in operation and financing costs, 2009's by $0.50 to $1.75. We still expect EPS to double in 2010, as expired energy contracts have already been largely hedged at much higher prices. We are reducing our 12-month target price by $5 to $32, a premium-to-peers p-e of 18.3 times our 2009 estimate. -J. McCann

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF MARVEL ENTERTAINMENT (MVL; 28.53):

Third quarter EPS of $0.64, vs. $0.45, is well above our $0.42 estimate, reflecting substantial box office for Iron Man and DVD revenues that were not expected before 2009. Licensing revenues were down 29% on dramatically lower Spider-Man licensing. We think toy sales and associated licensing will be impacted by the weaker economy, and with no movie releases coming before 2010, we see few near-term catalysts for MVL, although we believe its long-term plan is sound. We are raising our 2008 EPS estimate to $2.51 from $1.88, but cutting 2009's to $1.20 from $1.92. Our target price remains $37. -E. Kolb