S&P Picks and Pans: GE, UBS, Micron, Eli Lilly

Analysts' opinions on stocks in the news Thursday

From Standard & Poor's Equity Research

S&P MAINTAINS HOLD OPINION ON SHARES OF GENERAL ELECTRIC (GE; 22.27):

GE prices a common stock offering of 547.8 million shares at $22.25 per share (about $12 billion), with a potential overallotment of 82.2 million shares (about $1.8 billion). We view equity holders' dilution as substantial, with a potential increase to diluted shares outstanding, including warrants issued to Warren Buffett, of over 7%. However, we believe new capital will prevent a crisis of confidence with regard to access to capital for GE's financial services businesses, and will also provide GE with the flexibility to purchase financial assets currently being sold at favorable prices. -R. Tortoriello

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF UBS AG (UBS; 18.95):

Ahead of today's extraordinary general meeting, UBS said it expects a small profit in the third quarter and has substantially reduced U.S. commercial and residential mortgage-related positions. We are cutting our forecasts for both fixed income and trading revenues, as well as assets under management. We believe net new money outflows peaked in the second quarter, but we still see outflows in excess of CHF 20 billion in the third quarter. Due to forex changes and new guidance, we are widening our 2008 loss estimate to $3.01 from $2.68, and lowering 2009's EPS forecast to $2.42 from $3.13 and our DCF-derived target price by $2 to $22. -F. Braden-CFA

S&P REITERATES HOLD OPINION ON SHARES OF MICRON TECHNOLOGY (MU; 4.30):

August-quarter loss per share of $0.45, vs. $0.21 loss, is wider than our $0.19 loss estimate. Sales fell 3% from May-quarter to $1.45 billion, as both DRAM and NAND memory prices weakened. Gross margin reached negative territory due to an inventory write down. Expenses declined, but operating income fell with the gross margin. We think MU is in better financial position than some competitors, but we still see weak pricing preventing profits over the next few quarters. We are widening our fiscal year 2009 (August) loss projection to $0.65 from $0.08 loss. We are also cutting our 12-month target price by $1 to $6. -C. Montevirgen

S&P REITERATES BUY OPINION ON SHARES OF ELI LILLY (LLY; 43.63):

An unconfirmed Wall Street Journal report suggests LLY is the unidentified suitor for Imclone Systems (IMCL; 65.48), previously said to be offering $6.1 billion ($70 a share). Bristol-Myers Squibb (BMY; 20.89) had offered $62 ($4.7 billion). While IMCL's Erbitux could materially expand LLY's oncology line, we question the likelihood of a transaction, based on expected dilution as well as uncertainty over status of BMY rights to a next-generation Erbitux. We keep our $57 target price for LLY, which applies a peer-level 13 times to our 2009 EPS estimate. LLY's dividend yields 4.3%. -H. Saftlas