Stock Picks: Google, BofA, Shaw Group, NutriSystem

Plus Wall Street analyst opinions on Tempur-Pedic and Colfax

Google (GOOG)

Goldman Sachs maintains buy; raises estimates, price target

Goldman analyst James Mitchell said on Oct. 16 that Google reported better third-quarter revenue, margins, headcount, and capital spending figures than he expected in its earnings release after the close of trading Oct. 15. Mitchell noted that the company's reported earnings of $6.06 per share (which excluded stock buyback expense) beat his $5.61 estimate; the company's EBITDA margin was 150 basis points above his estimate on lower-than-expected R&D spending.

Mitchell believes the takeaway from Google's third quarter was improving price per click trends driving accelerating growth for its core desktop search business, especially in under-penetrated international markets such as Germany, France, Spain, Brazil, and China. He raised his $22.94 2009 earnings estimate (excluding employee stock option expense) to $23.61 per share, his $25.55 per share 2010 forecast to $27.86 per share, and his $585 price target to $635.

Bank of America (BAC)

Standard & Poor's Equity Research maintains strong buy

S&P Equity analyst Stuart Plesser said on Oct. 16 that BofA posted a third-quarter operating loss of 26 cents per share vs. earnings of 15 per share one year earlier, 16 cents wider than his estimate. Plesser noted that BofA's results included roughly $2.6 billion of writedowns largely due to improvement in its credit spreads. Loan-loss provisions remained elevated in the third quarter, said Plesser, but improved from second-quarter levels, signaling that credit conditions, although tough, are improving.

"Capital levels are strong and we continue to view the next major catalyst for these shares as the possible partial payback of TARP by year end," said the analyst in an Oct. 16 note.

Shaw Group (SHAW)

Baird downgrades to neutral from outperform

Baird analyst Andrea E. Wirth on Oct. 16 downgraded shares of engineering and construction concern Shaw Group, saying questions by federal regulators about a reactor design could spell trouble for the company's nuclear-power business.

Wirth focused her comments on an Oct. 15 decision by the Nuclear Regulatory Commission that said a key part of a reactor built by Westinghouse may not withstand a tornado, earthquake or even high winds. Shaw owns a 20% stake in Westinghouse Electric, a producer of atomic power-plant equipment.

Wirth said Shaw shares are near the firm's $32 price target and the "timing of the nuclear outlook has become increasingly uncertain."

Wirth said design-certification delays will result, possibly causing delays in approvals and "ultimately construction of the plants themselves." The start of construction of the plants was not expected until 2012 at the earliest, Wirth said. It is uncertain how long the project could be delayed.

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