Markets & Finance

S&P Cuts WellCare to Hold


From Standard & Poor's Equity Research

WellCare Health Plans (WCG) : Cuts to 3 STARS (hold) from 4 STARS (buy)

Analyst: P. Seligman

At an investor conference, WellCare Health Plans spoke of its prospects, boosting our confidence in our 2006 and 2007 estimates of $2.90 and $3.50. We see 2007's growth aided by mid-2006 entry into Georgia and plans to offer private fee-for-service Medicare Advantage plans in 2007. We are encouraged by what we view as good management execution and cost control. On these positives and a groupwide valuation rise, we are increasing our P/E-to-growth valuation to above-peer 1.25X from 1.1X. We are raising our target price by $7 to $63. Even so, we are downgrading WellCare after a recent rise in the share price.

Factset Research Systems (FDS) : Cuts to 4 STARS (buy) from 5 STARS (strong buy)

Analyst: Z. Bokhari

Aug-Q operating EPS (after options) of $0.45 vs. $0.37 is $0.02 above our estimate. Revenue grew 27% to $105M, $1M above our forecast, with organic growth at 19%. We are raising our FY 07 (Aug.) revenue estimate to $448M from $437M on Aug-Q's solid 22% growth in subscriptions. We are raising our FY 07 oper. EPS estimate by $0.05 to $1.85. Our DCF-based 12-month target price stays $57, assuming 11.2% weighted average cost of capital and 4% terminal growth rate. After rise today, we see bit less upside for Factset Research Systems shares, near historic highs now, at 26.2X our FY 07 estimate.

Maxim Integrated Products (MXIM) : Cuts to

3 STARS (hold) from 4 STARS (buy)

Analyst: T.Smith-CFA

Maxim Integrated Products lowers its guided range for Sep-Q revenue. It now sees revenues flat to down 3% from June-Q, as aggregate bookings have been trending below its expectations and the mix of orders have not matched inventory on hand. We are lowering our Sep-Q sales projection to a 1% decline from our prior estimate of a 3% rise. We think Maxim Integrated Products's cost structure may be pressured a bit in coming quarters by mismatch of orders and inventory. We are reducing our FY 07 (June) and FY 08 EPS estimates to $1.50 and $1.80, from $1.65 and $1.90. We are lowering our target price to $35 from $40.

Northstar Realty Finance (NRF) : Starts at 4 STARS (buy)

Analyst: J.Willey

We believe this specialty finance REIT has differentiated itself through its three-pronged commercial real estate investment approach, which includes direct debt, securities and net lease properties. Although we see a competitive environment, we believe Northstar Realty Finance's diversification and increased focus on direct originations will enable growth in earnings and dividends above industry average. We see '06 EPS of $0.71, with adjusted per-share funds from operations of $1.24. Our 12-month target price of $14 is based on a price-to-book of 1.5X. Northstar Realty Finance shares currently yield 9.6%.

Symbol Technologies (SBL) : Reiterates 3 STARS (hold)

Analyst: D. Cathers

Motorola (MOT) and Symbol agree to a transaction in which Motorola would acquire all Symbol shares at $15 per share, for a total value of about $3.9 billion. We believe the deal makes sense and that Motorola is well equipped to leverage Symbol's business and technologies. We are raising our 12-month target price for Symbol by $3, to the transaction price of $15, reflecting a p-e ratio of about 33 times our 2006 EPS estimate of 46 cents and 27X our 2007 estimate of 56 cents. Subject to shareholder and regulatory approval, the deal is expected to close in late 2006 or early 2007.

Motorola (MOT) : Reiterates 3 STARS (hold)

Analyst: K. Leon-CPA

Motorola, which has over $14.5 billion in cash and equivalents, agrees to acquire Symbol Technologies for $3.9 billion in cash, subject to needed approvals, in order to expand its wireless enterprise product offering. We view Symbol as compatible with Motorola's existing portfolio of enterprise solutions and see opportunities to grow combined businesses. Proposed deal is expected to be accretive to EPS in first year after closing, planned for early 2007. Motorola is buying an established company, but addition of enterprise sales with Symbol will be less than 5% of our 2007 Motorola pro forma sales estimate.


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