Analyst Picks and Pans November 13, 2009, 2:58PM EST

Picks of the Week: Wal-Mart, Hewlett-Packard, McDonald's

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Nov. 10

Standard & Poor's Equity Research Services maintains hold

S&P equity analyst Zaineb Bokhari said in a Nov. 10 note that as expected, European regulators issued an objection to Oracle's proposed acquisition of Sun Microsystems (JAVA), citing the potential for reduced competition in the database market if Oracle gains open source database provider MySQL (owned by Sun). Bokhari noted that the U.S. Department of Justice reiterated its clearance of the deal. The analyst thinks Oracle and MySQL compete at different ends of the database market and is not convinced that Oracle's ownership will limit competition.

Bokhari also thinks MySQL will expand Oracle's market reach, but "judging by current sales, not by much initially."

Priceline.com (PCLN)

RBC Capital rates outperform; raises estimates, price target

RBC Capital analyst Ross Sandler said on Nov. 10 that Priceline reported significant upside to his third-quarter estimates. He said the outperformance was broad-based, with hotel room nights accelerating to a year-over-year increase of 56%, while air tickets were up 31%. Sandler noted that there are few Internet companies in his coverage universe as large as Priceline experiencing this kind of volume acceleration at these growth rates.

The analyst also said his thesis for Priceline is based on industry-high exposure to the higher-margin hotel segment and faster growth in international regions continuing to drive above-average growth. He rised his $7.53 2009 pro forma EPS estimate to $8.21, his $9.21 forecast for 2010 to $10.04, and his $235 price target to $260.

Nov. 9

McDonald's (MCD)

Standard & Poor's Equity Research reiterates stong buy; raises estimates

S&P equity analyst Mark Basham said on Nov. 9 than McDonald's October U.S. comparable-store sales ("comps") were flat, in line with earlier management comments suggesting U.S. comps would be flat to down 1%. He noted that Europe and APMEA (Asia Pacific, Middle East & Africa) comps were both strong, up 6.4% and 4.7%, respectively; constant currency total sales were up 8.6% and 8.1%. Moreover, including effects of weaker dollar than a year ago, systemwide sales rose 16% in Europe and 21% in APMEA, Basham said.

The analyst said he had not previously incorporated a weak dollar benefit into his fourth quarter earnings per share (EPS) estimate, which management earlier said may be as much as 6 cents, but he raised this fourth-quarter and full-year 2009 estimates by 5 cents each to $1.05 and $4.05.

Northrop Grumman (NOC)

Jefferies & Co. upgrades to buy from hold; raises price target

Northrop Grumman said on Nov. 8 it was selling its advisory services unit TASC Inc. to private equity firm General Atlantic LLC and affiliates of Kohlberg Kravis Roberts & Co. for $1.65 billion in cash to comply with the government's "conflict of interest standards." Northrop said it will use the proceeds for a $1.1 billion increase in its stock buyback program.

The transaction shows Northrop Grumman's "understanding of and a capability to find value for shareholders in a changing market for defense-oriented suppliers," Jefferies & Co. analyst Howard Rubel wrote in a note to investors on Nov. 9. "Changes in procurement law almost required this sale."

He upgraded the company's shares, commending the company for returning the deal's gains to shareholders and what he said was a "reasonable" price for the TASC unit. Rubel also boosted his price target on the stock to $62 from $55.