Markets & Finance

S&P Downgrades Global Payments


From Standard & Poor's Equity Research

Accenture Ltd. (ACN) : Cuts to 3 STARS (hold) from 4 STARS (buy)

Analyst: Dylan Cathers

Following the recent sharp rise in the shares, our downgrade is based on valuation. Aug. quarter operating earnings per share (EPS) of $0.39 vs. $0.33, after stock option expense, is $0.03 above our estimate. We are raising our fiscal year 2007 (Aug.) EPS estimate by $0.01 to $1.81, reflecting transfer of U.K. National Health Service contract to Computer Sciences (CSC). Accenture will return about $120 million to the NHS as part of the agreement. We see Accenture revenues rising 9% this year, driven by outsourcing growth rate in the low teens. Our target price remains $34.

Global Payments (GPN) : Cuts to 4 STARS (buy) from 5 STARS (strong buy)

Analyst: Zaineb Bokhari

Global Payments shares are up this morning following release of August quarter EPS at $0.51 (after options) vs. $0.39. This beats our $0.40 estimate, aided by cost control and lack of certain year-ago costs. Revenues grew 16% to $260 million, $2 million above our estimate. We are raising our fiscal year 2007 (ending May) estimate by $0.07 to $1.74 to reflect the August quarter, and our view that investment in international markets and some price pressure in money transfer may limit the expansion of fiscal year 2007 operating margins. Our target price stays at $51.

Amkor Technology (AMKR) : Reiterates 3 STARS (hold)

Analyst: David Kaplan

Amkor Technology extends its consent solicitation and increases the consent fee to noteholders for a waiver of certain defaults that may have and may occur because of the delay in filing its second quarter 10-Q filing with the SEC while it conducts an internal investigation into option grants. With a debt-to-cap ratio of 87% we believe the highly-levered Amkor Technology is in a weak negotiating position. The maximum total consent fee was raised 25-75 basis points, depending on the note, from the initial solicitation at 50 bps. Even so, we believe the shares already reflect the risks of high-leverage.

Corinthian Colleges (COCO)

Reiterates 2 STARS (sell)

Analyst: Michael Jaffe

Corinthian's June-quarter EPS of 13 cents, vs. 14 cents one year earlier, both before special charges, is in line with our forecast. Enrollment trends remained soft, with total students down 2% and new students about flat. With Corinthian's fiscal 2007 (June) EPS guidance of 50 to 55 cents falling below S&P and Wall Street's estimates, its shares are down 7% this morning. We are cutting our fiscal 2007 estimate by 15 cents to 45 cents, and see 55 cents in fiscal 2008. With Corinthian's business yet to show any signs of a turnaround, in our view, we are cutting our 12-month target price by $1 to $10, based on a blend of relative p-e and

discounted cash-flow measures. /M.Jaffe

Affiliated Computer Services (ACS)

Reiterates 3 STARS (hold)

Analyst: Dylan Cathers

ACS did not file its fiscal 2006

(June) 10-K report by the Sept. 28 deadline, as it continues an internal investigation into historical stock option pricing practices. We expect the investigation to be completed during the December quarter. An SEC informal investigation is ongoing, as is the shareholder lawsuit against current CEO Mark King and former CEO Jeff Rich, which includes ACS as a "nominal defendant." ACS has obtained waivers on $2 billion in borrowings that extend the date for providing audited fiscal 2006 results to Dec. 31. Uncertainty surrounding the filings would keep us from adding to positions.

TIBCO Software (TIBX)

Maintains 3 STARS (hold)

Analyst: Zaineb Bokhari

August-quarter operating EPS of 6 cents (after option expense) vs. 5 cents one year earlier is one cent above our estimate. Revenues of $120 million, up nearly 14%, were in line, driven by a 15% increase in licenses. Average deal sizes rose and deferred revenues, boosted by maintenance renewals, also grew. We are raising our fiscal 2006 (ending November) EPS estimate by 2 cents to 27 cents, based on our outlook for license growth as we enter a seasonally strong period for TIBCO, and are boosting fiscal 2007's by 3 cents to 32 cents. Our 12-month target price rises $1 to $10, or 1.8 times p-e-to-growth, a historical TIBCO average, using our fiscal 2007 estimate.


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