S&P Picks and Pans: Microsoft, Bear Stearns, AT&T, Hasbro, Schering

Analyst opinions on stocks making headlines Monday

From Standard & Poor's Equity Research

S&P REITERATES STRONG BUY RECOMMENDATION ON SHARES OF MICROSOFT

MSFT; $30.17

Microsoft agrees to comply with key parts of the 2004 European Commission antitrust decision by reducing royalties for competitors and providing technical information of its operating system to open source developers. MSFT will market a version of Windows without Windows Media Player. We believe this outcome will not significantly impact financial results near term, but most likely will result in increased competition long term for Windows and other software associated with the operating system. We make no changes to our estimates but view this development as a minor negative. /J. Yin

S&P REITERATES HOLD OPINION ON SHARES OF BEAR STEARNS

BSC; $116.41

Bear announces a deal with CITIC Securities, which includes the sharing of management expertise and technology to expand the companies' presence in China, a joint venture combining their existing presence in the rest of Asia, and investments in each other of about $1 billion. The pending transaction requires various regulatory approvals in the U.S. and China. We view the move as a smart one for Bear, in that it will expand its presence in lucrative Asian markets with an established player. We are keeping our target price of $135, 1.5 times projected book value. /M. Albrecht

S&P MAINTAINS HOLD OPINION ON AT&T SHARES

T; $41.06

Ahead of AT&T's third quarter results to be reported tomorrow morning, we are maintaining our forecast for revenues of $29.9 billion and EPS of 70 cents. We believe wireless will be the main driver of revenue growth, driven by net customer additions and increasing data service usage. We look for cost savings from merger integration activities also helping with AT&T's margin expansion. However, we are concerned that broadband growth might have been slowed by cable competition and the impact of the housing market, even as AT&T rolls out new products. We are leaving our 12-month target price at $41. /T. Rosenbluth

S&P MAINTAINS HOLD OPINION ON SHARES OF HASBRO

HAS; $28.41

Hasbro reports third quarter EPS of 78 cents, before a 17 cents favorable tax adjustment, vs. 58 cents, ahead of our 72 cents estimate. Shipments of Transformers and Marvel products helped drive net revenues up 18%. We view growth in both the North American and International segments (10% and 33%, respectively) as favorable, especially considering domestic weaknesses at other companies in the toy industry. We are raising our 2007 EPS estimate to $2.04 from $1.95, and our 2008 estimate to $1.89 from $1.85. We are keeping our 12-month target price of $32, based on our updated relative analysis. /E. Kolb

S&P MAINTAINS STRONG BUY OPINION ON SHARES OF SCHERING-PLOUGH

SGP; $28.36

Third quarter operating EPS of 28 cents vs. 19 cents is 4 cents below our estimate. We attribute the miss to lighter-than-expected sales growth of 9%, of which one-third came from currency, and narrower margins than expected. However, total Vytorin/Zetia cholesterol joint venture sales rose 27% to $1.3 billion. We continue to see longer-range prospects enhanced by the planned acquisition of Organon in Q4, and an expanding pipeline. We think two exciting R&D drugs are boceprevir for hepatitis C, and TRA for cardiovascular conditions. We reiterate our 12-month $37 target price, based on forward P/E and discounted cash-flow. /H. Saftlas