Markets & Finance

S&P Upgrades Vodafone to Hold


From Standard & Poor's Equity Research

Vodafone Group (VOD) : Ups to 3 STARS (hold) from 2 STARS (sell)

Analyst: Todd Rosenbluth and Subhajit Gupta

We are lowering our 12-month target price on Vodafone Group's American Depositary Receipts to $22 from $25, to reflect the weakening of the U.S. dollar versus the pound and the company's special distribution of additional shares to holders at the end of July. However, the ADRs have declined 12% since mid-May, and in our view now better reflect the challenges we see Vodafone Group facing, including operating in maturing wireless markets and dealing with reduced termination and roaming rates. We remain unconvinced that Vodafone Group has a competitive advantage based on its scale.

Wild Oats Markets (OATS) : Ups to 4 STARS (buy) from 3 STARS (hold)

Analyst: Joseph Agnese

We are increasing our 2006 EPS estimate by 4 cents to 42 cents. We are raising our target price by $2 to $22. We believe results will benefit not only from increased promotional spending in the second half of the year but also from improved sales leverage and a changing product mix. Although margins may be pressured in the near term by accelerating new store growth, we see expansion boosting long-term growth. Also, we see benefits as increased focus by traditional food retailers should lead to strengthening consumer awareness.

NVR (NVR) : Cuts to 1 STAR (strong sell) from 3 STARS (hold)

Analyst: William Mack, CFA

New home data, including July U.S. housing figures released today, suggest to us that consumer demand, particularly in NVR's key mid-Atlantic markets, is likely to decline further through year end. We think incentives and other promotional measures, while mitigating unit sales declines, will contribute to pretax margin diminution of up to five percentage points in 2007 vs. peak 2005 levels. We are trimming our 2006 EPS estimate $1 to $100, and are lowering 2007's to $90 from $95. Our 12-month target price of $400 is cut today from $465.

Infosys (INFY) : Cuts to 3 STARS (hold) from 4 STARS (buy)

Analyst: Dylan Cathers

After a sharp rise in recent weeks, the price of the American Depositary Shares is approaching our 12-month target price of $45. Our target price is based on a peer-based price-to-earnings-to-growth of about 1.1 times and a price-to-earnings of 35.5 times our calendar 2006 earnings per ADS estimate of $1.26. Our fiscal year 2007 (ending Mar.) expectations for revenue growth of 35% and earnings of $2.70 are unchanged. We are forecasting earnings growth slightly slower than revenue growth in order to reflect rapidly rising wage and training costs, an issue that we see affecting all of the Indian IT outsourcing companies.

Hutchison Telecom (HTX) : Ups to 4 STARS (buy) from 3 STARS (hold)

Analyst: Alexander Chia

Hutchison Telecom's first half 2006 revenues and earnings before interest taxes depreciation and amortization (EBITDA) rose 48% and 61%, respectively. Results were driven by what we view as robust growth in India and encouraging fixed line and mobile operations in Hong Kong. But, with net finance costs rising 93%, due to the impact of recent acquisitions, net profit was lower than expected. While we think second half 2006 results could be hurt by the launch of services in Vietnam and Indonesia, we are bullish on Hutchison Telecom given its key role in the rapidly growing Indian wireless market. We raise our target price to $31 from $28 on a higher valuation for its Indian operations.

Hewlett-Packard (HPQ) : Reiterates3 STARS (hold)

Analyst: Richard Stice, CFA

Hewlett-Packard posts July quarter operating EPS of 49 cents vs. 36 cents, 2 cents below our estimate. Revenue rose 5%, as growth in notebooks and software was partially offset by weakness in services. We are encouraged with Hewlett-Packard's cost reduction efforts as well as its new share repurchase authorization. We are raising our fiscal year 2006 (ending Oct.) EPS estimate by 17 cents to $2.22 and our 12-month target price by $6 to $40. However, top line growth remains sluggish, in our view, and with the shares trading at a premium in excess of 10% to the S&P 500, we believe significant upside is limited.


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