Picks of the Week: Visa, Apollo Group, Baidu, Verizon

Wall Street analysts give their buy, sell, or hold views on various stocks in the news this week

Highlights of analyst stock opinions issued the week of Oct. 26-30:

Oct. 30

McAfee (MFE)

R.W. Baird upgrades to outperform from neutral; raises price target

R.W. Baird analyst Steven Ashley said Oct. 30 that McAfee reported in-line third-quarter revenue of $485 million and earnings per share (EPS) of 62 cents compared to consensus estimates of $486 million and 61 cents and his forecast of $489 million and 62 cents. Ashley expects investors to come away from the third quarter with mixed emotions, which he views as an opportunity. He noted concerns might include: 1) whether PC OEM deals really provide adequate return on investment; 2) challenges in closing very large deals; and 3) Symantec's (SYMC) improved execution in its consumer business.

On the positive side, Ashley notes that: 1) The company's OEM deal with Dell (DELL) was extended two years; and 2) Symantec's fourth quarter revenue guidance was above the Wall Street consensus. He raised his $45 price target to $50.

Estee Lauder (EL)

Wedbush Morgan reiterates outperform; raises estimates, price target

Wedbush analyst Rommel Dionisio said on Oct. 30 that Estee Lauder's $1.852 billion first-quarter revenue was relatively in line with his estimates, but the company's adjusted EPS of 85 cents far exceeded his recently raised 40-cent view, and management's revised 23 cents-30 cents estimate. Dionisio tied the company's outperformance to much lower-than-expected SG&A spending in the face of a challenging global economy. He noted that the Asia Pacific and travel retail operations were particular bright spots in the first quarter.

The analyst raised his $1.80 fiscal 2010 (ending June) EPS estimate to $2.07, and hi $2.03 fiscal 2011 forecast to $2.07, after Estee Lauder lifted its fiscal 2010 view to $1.95-$2.10 from $1.55-$1.70. He raised his $48 price target to $50.

Oct. 29

Exxon Mobil (XOM)

Standard & Poor's Equity Research reiterates strong buy; raises estimates, price target

S&P equity analyst Tina Vital said on Oct. 29 that Exxon Mobil posted third-quarter operating earnings per share (EPS) of 98 cents, vs. EPS of $2.58 one year earlier, reflecting lower commodity prices and narrowed margins. Vital said the results were 2 cents below her estimate, reflecting weak U.S. refining results. Oil & gas production rose 2.7% to 3.69 million barrels of oil equivalent (boe) per day on major project start-ups, but was below Vital's estimate; she expects flat growth in 2009 with a ramp-up in 2010.

Vital raised her 2009 operating EPS estimate by 8 cents to $3.88, her 2010 forecast by 8 cents to $5.96, and her 2011 view by 5 cents to $7.50. She increased her 12-month price target by $4 to $88.

Oct. 28

Visa (V)

Standard & Poor's Equity Research maintains hold; raises estimate, price target

S&P equity analyst Stuart Plesser said on Oct. 28 that Visa posted fiscal fourth-quarter operating earnings per share (EPS) of 74 cents, vs. 58 cents EPS one year earlier, matching his estimate. Notably, said Plesser, Visa's global payment volume declined only 2% vs. a 5% decline in the previous quarter, which points to a stabilization of spending habits by the consumer. Debit payments rose year over year, noted the analyst, as consumers continue to favor debit transactions -- a positive for Visa as it has a preponderance of debit cards.

Based on the higher spending volume, Plesser raised his fiscal 2010 (ending September) EPS estimate by 17 cents to $3.55. He also hiked his price target by $12 to $88.

AK Steel Holding (AKS)

U.S. Steel (X)

KeyBanc Capital Markets downgrades both to hold from buy

Steel Dynamics (STLD)

Reliance Steel & Aluminum (RS)

Olympic Steel (ZEUS)

KeyBanc Capital Markets reiterates buy on each

The economy is recovering too slowly to help U.S. steel manufacturers boost profitability soon, KeyBanc Capital Markets analyst Mark L. Parr said on Oct. 28. Parr said ferrous scrap prices could continue to decline over the next couple of months. He cited a recent $30 per ton decline in export scrap pricing.

"Domestic mills and export buyers remain on the sidelines, likely dampening the ability to substantially maintain or raise hot-rolled pricing realizations over the near term despite low supply chain inventories," Parr said in a client note.

Parr reduced his ratings for AK Steel and U.S. Steel, saying fourth-quarter outlooks from the two steel makers Tuesday were "somewhat disappointing."

"The outlooks clearly imply profit is very levered to pricing," Parr said. "With a more subdued pricing recovery unfolding, profit recovery will likely also be more gradual in nature."

U.S. Steel said Tuesday it expects better results in the fourth quarter, but it also said it plans to idle two blast furnaces. AK Steel said it expects shipments to rise in the final three months of the year. But its average selling price is expected to fall because it forecasts a higher percentage of carbon steel sales relative to more expensive stainless and electrical steels.

Parr said steel service center and restocking also may be hampered by a continuing lack of credit. "In our view, these issues put a premium on companies that are nimble, low-cost producers and those in place to support sporadic levels of demand as the recovery unfolds," he said.

He reiterated buy ratings on Steel Dynamics, Reliance Steel & Aluminum, and Olympic Steel Inc.

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