From Standard & Poor's Equity Research
Marathon Oil (MRO)
Upgrades to 4 STARS (buy) from 3 STARS (hold)
Analyst: Tina Vital
The upgrade is based on valuation. While U.S. refining margins have narrowed since August, we believe this is only temporary, and expect increased demand and the switch to winter fuels should soon boost margins. Our revised price and margin projections lead us to raise our 2006 EPS estimate by 78 cents to $13.36, but lower 2007's by 85 cents to $13.83. Blending our
discounted cash-flow and relative valuations, we are reducing our 12-month target price by $6 to $93 per share, representing an enterprise value of 3.6 times our 2006 EBITDA estimate, at a discount to peers. But with shares sharply lower of late, we would buy the stock.
Crucell (CRXL) : Cuts to 3 STARS (hold) from 4 STARS (buy)
Analyst: David Seemungal
The shares are up sharply this week, following a World Health Organization announcement that the company's liquid pentavalent vaccine, Quinvaxem, had been granted prequalification status. Crucell has confirmed that it has begun production, and that the first batches are available for sale to UNICEF and other purchasing organizations. Although the announcement is a positive, we anticipated this development, and we continue to look for a 2006 loss of $0.57 per ADS and profit of $0.07 in 2007. With the ADSs near our 12-month target price of $24, we would not add to positions.
Redback Networks (RBAK) : Starts at 4 STARS (buy)
Analyst: Ari Bensinger
Given the importance to telecom service providers of having a triple-play offering of voice, video and data, we expect multiservice edge routers, Redback Networks's core market, to become an increasing part of edge router spending. With an expanding customer base and what we see as significant operating leverage in its business model, we believe Redback Networks can post sales and earnings growth well above its peers over the next three years. We see EPS advancing to $0.55 in 2007 from the $0.19 that we estimate for 2006. Our 12-month target price is $17.
InPhonic (INPC) : Cuts to 3 STARS (hold) from 4 STARS (buy)
Analyst: Ari Bensinger
With the stock up roughly 30% since early July, we would no longer recommend adding to positions. Given InPhonic's strong market position in the wireless-phone Internet market, we believe the company will be able to post revenue growth well above its peers during 2006 and 2007. We are also positive on its new residual revenue model, believing it should improve sales linearity and visibility. However, at 31 times our 2007 EPS estimate of $0.25, above peers, we think the current valuation of InPhonic shares appropriately reflects the company's growth opportunities.
Accenture Ltd. (ACN)
Reiterates 4 STARS (buy)
Analyst: Dylan Cathers
Accenture will transfer its $3.73 billion, nine-year U.K. National Health Service contract to Computer Sciences (CSC). In our view, the move is a win-win for both companies, as Accenture has had problems with the roll-out of the system, and it has adversely affected margins in the past few quarters. CSC, in contrast, has worked successfully through problems with a subcontractor, which Accenture has not. Accenture is set to post fiscal 2006 (August) results today. Due to the removal of the problematic contract, we are raising our target price by $2, to $34, on a peer-based p-e ratio of 20 times our calendar 06 EPS estimate of $1.68.
Reiterates 3 STARS (hold)
Analyst: Kenneth Leon, CPA
Motorola and Verizon Wireless (VZ) launched a new handset model, the MOTOKRZR K1m. We view the KRZR as a high volume, mid-range model, priced at $200 net of a $50 rebate for a new two-year customer agreement. Smaller than the popular RAZR, KRZR offers enhanced services tied to Verizon Wireless's V-CAST services. We believe Motorola is astute in pushing a mid-range model for the mass market vs. new handsets for the high-end segment. Not to be outdone, Nokia (NOK) released new advanced models yesterday. With Motorola shares priced near peers on a p-e basis, we would hold positions.