Markets & Finance

S&P: Still Buy P&G


Procter & Gamble (PG): Reiterates 5

STARS (buy)

Analyst: Howard Choe

The consumer-products giant expressed comfort with the Street's September-quarter earnings per share estimate of 72 cents. The company expects sales growth in the low double-digits percentage range, with internally generated volume growth in the high single digits. We are raising our September-quarter estimate to 72 cents from 70 cents as we adjust our volume projection upward. Our fiscal 2005 (ending June) EPS estimate remains $2.59 on our adjusted second half assumptions. We are encouraged by P&G's sales trends, bolstered by developing markets and new products. Given our view of its healthy and consistent earnings growth, we see P&G as attractive at a discount to its large-cap peers.

Deere & Co. (DE): Downgrades to 4 STARS (accumulate) from 5 STARS (buy)

Analyst: Anthony Fiore, CFA

We continue to believe that favorable conditions in many of Deere's end-markets will persist over the next 6 to 12 months. As in prior industry cycles, however, we expect Deere's shares to trade at lower multiples during peak or near-peak EPS years. Based on the growing maturity of the farm equipment cycle, we now see less upside potential for the shares. Accordingly, we are reducing our 12-month target price to $76 from $89, to reflect our revised valuation, which is based on a blend of our

discounted cash-flow model and a target p-e multiple of about 12, which is in line with historical norms.

Ericsson (ERICY):

Reiterates 4 STARS (accumulate)

Analyst: Ari Bensinger

Reflecting strong mobile phone sales, leading handset maker Nokia (NOK

; S&P rank, 4 STARS) raised its third-quarter financial guidance on Sept. 9. Nokia forecasts healthy sequential handset volume growth in the third quarter, which is historically flat with the second. With a continued strong replacement cycle in developed markets, and solid new subscriber growth in emerging markets, we see full-year 2004 handset volume over

25% higher than the 480 million units shipped in 2003. We expect wireless equipment vendors Qualcomm (QCOM

; 5 STARS, buy), Motorola (MOT

; 5 STARS), and Ericsson to benefit from higher handset unit volumes.

Texas Instruments (TXN): Reiterates 3 STARS (hold)

Analyst: Amrit Tewary

Following the company's mid-quarter update, we now expect third-quarter sales to be down 2% from the second, compared with our prior estimate of up 1%. We continue to believe macro concerns and channel inventory issues are hurting incoming order rates. However, primarily reflecting TI's lowered tax rate forecast and a lower expected accrual for profit sharing, we are raising our EPS estimates for the third quarter to 28 cents from 25 cents, for full 2004 to $1.00 from 96 cents, for 2005 to $1.11 from $1.07, and for 2006 to $1.06 from $1.00. We are also boosting our 12-month target price to $22 from $21, based on our p-e model.

Corning (GLW): Reiterates 3 STARS (hold)

Analyst: Ari Bensinger

Corning confirmed its third-quarter guidance range for revenue of $950 million to $1 billion and EPS of 10 cents to 12 cents. The company sees liquid crystal display volume rising 5% to 10% from the second quarter, below prior guidance of about 10%. However, it expects optical fiber volume to increase 5% to 10%, well above prior guidance for a 10% to 15% decline, on unexpected strength in North America. We believe that optical fiber and related hardware equipment could continue to accelerate faster than expected on new fiber to the premises initiatives. Based largely on the group average book value, our 12-month target price is $12.


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