Plus: Analyst opinions on Tribune Co. and China Petroleum & Chemical
From Standard & Poor's Equity ResearchApple Inc. (AAPL)
Reiterates 5 STARS (strong buy)
Analyst: Richard Stice, CFA
December-quarter EPS of $1.14 vs. 65 cents is well above our 73 cents estimate. We are encouraged with Mac unit growth of 28%, as we believe this signifies additional share gains. iPod unit growth of 50% greatly exceeded our forecast and profitability for this category was boosted by lower component costs. We are raising our fiscal 2007 (ending September) EPS estimate by 62 cents to $3.34 and our 12-month target price by $9 to $119. Given our view of favorable operating leverage, accretion potential of pending handset offering and further growth opportunities for Mac product line, we advise purchase.
Tribune Co. (TRB)
Reiterates 3 STARS (hold)
Analyst: James Peters, CFA
According to an SEC filing, the Chandler Trusts have made a tentative bid for the company, pending additional due diligence. The Trusts value their proposal conservatively at $31.70 per Tribune share, including $19.30 cash for the company's publishing assets and $12.40 for a spinoff of the broadcast and entertainment assets. Additionally, the Wall Street Journal reports submission of 2 other unconfirmed proposals. We find it difficult to evaluate unconfirmed and tentative bids, but as the Chandler proposal represents only a 4.5% premium to yesterday's closing price, we still view a sale of all of Tribune as unlikely.
China Petroleum & Chemical (SNP)
Maintains 3 STARS (hold) on American Depositary Receipts
Analyst: Lorraine Tan, CFA
The company reports 2006 operating statistics, which are largely in line with our expectations. Crude production grew 2.3%, as China Petroleum continued to sell an increasing amount of product through its retail outlets. The 13% rise in retail sales and the decline in direct distribution and wholesale sales should support our forecast for higher marketing segment earnings. While we like China Petroleum's improving fundamentals and relatively strong expected earnings growth, we believe much of the good news is already reflected in the current share price. We are maintaining our target price of $84.