Markets & Finance

S&P Trims Target Price for Intel


Intel (INTC): Reiterates 3 STARS (hold)

Analyst: Amit Tewary

In a mid-quarter update, Intel maintained the mid-point of its third-quarter sales and gross margin guidance. We still see third-quarter sales up 7% sequentially to $9.9 billion on strong demand for notebook PC platforms, and gross margin of about 60% for the quarter. Excluding a one-time tax item, we still forecast third-quarter operating earnings per share of 36 cents. We are trimming our 12-month target price by $1, to $29, based on our revised p-e and price-to-sales analyses. Our target valuation takes into account our view of above-average near-term macroeconomic risk and decelerating industry growth in 2005 and 2006.

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

Analyst: Amit Tewary

Texas Instruments in its third-quarter mid-quarter update raised revenue and earnings per share guidance. We think the company is benefiting from healthy demand, especially in Asia, in a seasonally strong period as some customers build inventory. We are raising our third-quarter sales estimate, and now see 9.5% sequential growth. Before projected option expense of 3 cents, we now estimate third-quarter earnings per share of 40 cents, up from our prior 36 cent estimate. We are raising our full 2005 estimate to $1.43 from $1.36, and 2006's to $1.77 from $1.61. Our 12-month target price rises to $38 from $35, based on our revised p-e and price-to-sales analyses.

XTO Energy( XTO): Cuts to 4 STARS (buy) from 5 STARS (strong buy)

Analyst: Charles LaPorta

We believe XTO will benefit from the impact of Hurricane Katrina in the Gulf of Mexico, given that its core areas lie in the Mid-Continent, San Juan, and Rocky Mountain Basins, which were virtually unaffected. We are raising our 2005 and 2006 earnings per share estimates to $2.95 and $3.50 from $2.75 and $3.20, respectively, and our target price rises $3 to $47, reflecting a premium-to-peers p-e of 15.9 times our 2005 estimate. We believe XTO is one of the best-managed and well-positioned companies in our coverage. However, we also think its share price is increasingly reflecting that view.

Aspen Insurance Holdings (AHL): Ups to 5 STARS (strong buy) from 4 STARS (buy)

Analyst: Catherine Seifert

Bermuda-based reinsurer Aspen Insurance Holdings announced that its Katrina-related claims will likely total $150 million after tax. We are cutting our 2005 earnings per share estimate by $2.08 to $2.07, reflecting this impact. The losses, mostly from property reinsurance, were actually less than we expected. We believe the clarity regarding Katrina losses and Aspen Insurance Holdings' comments that premium growth may exceed guidance provide its shares with two catalysts. Our 12-month target price is $34.

MetLife( MET): Reiterates 4 STARS (buy)

Analyst: Frank Braden

MetLife announced that the regulator NASD made a preliminary determination to file charges against the Metlife units MetLife Securities, New England Securities and Walnut Street Securities. The late trading charges stem from an investigation into the company's 2003 mutual fund transactions after its trading deadline. Although our view is tempered by the investigation, we think MetLife is attractive based on its relative valuation to peers and growth potential. Our target price remains $56, as we believe the violations are relatively small in scope and we do not expect to see them have a material financial impact.

Yellow Roadway (YELL): Maintains 3 STARS (hold)

Analyst: Andrea West, CFA

Yellow Roadway cut its third-quarter earnings per share outlook by 20 cents to between $1.40 and $1.45, based on its difficulties implementing new operating processes at Roadway, in addition to a 5 cent earnings per share hit from Hurricane Katrina. We find Yellow Roadway's process improvement project difficulties concerning, given our view that the company's acquisition-driven strategy relies upon ongoing cost savings from restructuring and efficiency programs. We are reducing our earnings per share estimates to $5.19 from $5.45 for 2005, and to $5.80 from $6.00 for 2006. We are cutting our 12-month target price to $46 from $57, based on a blend of our discounted cash flow and relative valuation models.


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