S&P Downgrades Shares of Google, AT&T

Plus: Analyst opinions on Kimberly-Clark, Wrigley, and more

From Standard & Poor's Equity Research

Google (GOOG)

Cuts to 3 STARS (hold) from 4 STARS (buy)

Analyst: Scott Kessler

Shares are up 19% this month, and are approaching our recently increased 12-month target price of $500. We remain positive on Google's fundamentals specifically, and online advertising in general. However, risk-reward considerations contribute significantly to our downgrade. With Google today reaching an all-time intra-day high, we are growing increasingly wary of what we perceive to be potentially excessive enthusiasm regarding the company and stock. At current levels, we see the shares as only reasonably valued.

AT&T (T)

Downgrades to 3 STARS (hold) from 4 STARS (buy)

Analyst: Todd Rosenbluth

Following the company's conference call Monday to review its third quarter EPS, which bested our estimate by 7 cents, we expect that AT&T will continue to benefit from synergies from prior wireline and wireless mergers. We are raising our 2006 EPS estimate by 10 cents to $2.32 and our 2007 estimate by 5 cents to $2.45. However, we remain concerned about the impact of competitive pressure on revenues, despite what we view as aggressive bundling efforts. Our target price stays $36, reflecting a p-e of 15 and an enterprise value/EBITDA in line with peers. After AT&T's strong run so far in 2006, we would not add to positions.

Kimberly-Clark (KMB)

Upgrades to 4 STARS (buy) from 3 STARS (hold)

Analysts: Richard Joy, Loran Braverman, CFA

Kimberly-Clark reports third quarter EPS before one-time items of 99 cents, in line with our estimate, and up a bit from last year's 95 cents, also before one-time items. Reported EPS is 79 cents, which is after 16 cents in charges for strategic cost reductions. Sales rose 5.2%, slightly better than our projection, and included nearly 2% benefit from favorable sales mix and price. We are maintaining our 2006 EPS estimate of $3.90 and our 2007 estimate of $4.27. We are raising our target price by $11 to $76 to reflect raised peer multiples and our increased confidence in our 2007 projections.

Eni S.p.A. (E)

Ups to 4 STARS (buy) from 3 STARS (hold)

Analyst: Tina Vital

Today, Eni announced a gas discovery at Longhorn North in the deepwater Gulf of Mexico. We look for the company to post what we view as solid upstream production growth of 4% per annum during 2006-2009. We expect this major to post third quarter operating earnings of $1.77 per ADS when it reports results on Friday, November 10. After blending our discounted cash flow and relative valuations, we are raising our 12-month target price by $3 to $74, representing an expected enterprise value of 4.5 times our 2007 EBITDA estimate; a slight premium to peers that we think is warranted.

Equity Office Properties (EOP)

Ups to 2 STARS (sell) from 1 STAR (strong sell)

Analyst: Royal Shepard

We think Equity Office Properties will face less risk from the roll-down of rents on expiring leases as it enters 2007. At the same time, an accelerated asset disposition program may begin to provide some value to shareholders as proceeds are reinvested in new assets. We think cash proceeds should also provide some protection to investors against further dividend cuts. We are raising our target price by $13 to $37, based primarily on updated calculation of net asset value in view of recent market prices. Even so, we still consider the shares overvalued and assign a sell recommendation.

Wm. Wrigley Jr. (WWY)

Maintains 5 STARS (strong buy)

Analyst: Richard Joy

Third-quarter EPS, before special items, of 55 cents, vs. 47 cents, is 3 cents above our estimate. Net sales grew 11%, compared to our 9% growth forecast, on strong 9% increase in worldwide volume. We see new products continuing brand momentum into 2007. Wrigley also announced appointment of William Perez as president and CEO, which we view favorably. Given upside to our third quarter forecast, we are increasing our 2006 EPS estimate by 3 cents to $2.00. We believe long-term growth potential makes the shares compelling. Based on improving earnings visibility, we are raising our target price by $6 to $62.