Plus: Analyst opinions on Hutchison Telecom, Oracle, and more
From Standard & Poor's Equity ResearchJetBlue Airways (JBLU)
Reiterates 3 STARS (hold)
Analyst: J. Corridore
JetBlue lowers guidance on its operating and pretax profit margins to 7%-9% and 2%-4%, from 8%-10% and 3%-5%. It blames winter weather, flight cancellations and higher fuel costs. We see it as positive that JetBlue is reiterating a profit forecast despite recent weather troubles. We think the company has done better operationally since its Feb. 14 storm debacle. Based largely on last Friday's storm, we are lowering our 2007 EPS estimate to 40 cents, from 43 cents. We are also cutting our 12-month target price by $1, to $14, an above-peer 35 times our 2007 estimate. We see JetBlue shares as high-risk.
Hutchison Telecom (HTX)
Downgrades ADRs to 3 STARS (hold) from 5 STARS (strong buy)
Analyst: A. Chia
The company's 2006 revenues and net profit are slightly below our expectations. Results were largely driven by 55% revenue growth in the company's Hutch Esser Indian operations, which are being sold in the second quarter, pending necessary approvals. Excluding the special dividend, and applying a discount to our discounted cash-flow (DCF) analysis for increased risks, we are reducing our target price by $7 to $35. In the absence of any additional info regarding the company's use of cash proceeds, and our view that near-term benefits from newer markets of Vietnam and Indonesia will be limited, we are lowering our opinion on the ADRs.
Maintains 5 STARS (strong buy)
Analyst: Z. Bokhari
Oracle's February-quarter operating EPS of 24 cents (after one cent of option expense) vs. 19 cents one year earlier is 2 cents above our view. Non-GAAP revenue grew 26% to $4.4 billion, above our $4.3 billion forecast, with broad-based strength across segments. New licenses rose 27% to $1.4 billion, beating our 17% estimate. We think February-quarter results indicate that execution issues are being addressed. We are optimistic about the May quarter, but note year-ago comparisons are tough. We raise our fiscal 2007 (ending May) EPS estimate by 3 cents to 96 cents and fiscal 2008's by 4 cents to $1.10. We keep our DCF-based target price at $22, assuming 10.5% cost of capital and 4% terminal growth.
Cameron International (CAM)
Cuts to 3 STARS (hold) from 4 STARS (buy)
Analyst: Stewart Glickman
Our downgrade reflects valuation, after the shares have risen about 14% year-to-date. And now, in our opinion, they offer limited upside. We think Cameron fundamentals remain strong, particularly for subsea work, since we continue to expect robust demand for deepwater oilfield services. We keep our 12-month target price of $61.
Reiterates 3 STARS (hold)
Blockbuster settles its dispute over CEO John Antioco's employment agreement and 2006 bonus, with Antioco to receive a $3 million bonus, below the $7.65 million stipulated in his employment agreement. Leaving a year early, at 2007 end, he will receive a lump sum of about $5 million, below the stipulated $13.5 million. While we view the resolution as favorable for Blockbuster, we believe the company's biggest challenge is the secular decline of the in-store rental industry and its ability to shift to a profitable online business. We maintain our EPS estimates and our 12-month target price of $8.
Barrick Gold (ABX)
Reiterates 4 STARS (buy)
Analyst: Leo Larkin
On our less optimistic outlook for gold output and costs in 2007, we are cutting our 2007 EPS estimate to $1.85 from $2.00. We expect lower ore grades will depress volume and raise unit production costs. On our revised estimate, we are cutting our 12-month target price to $38 from $43. For 2008, we estimate EPS of $1.95 on flat output and a higher gold price. Long-term, we see Barrick Gold benefiting from greater exposure of its production to the spot price of gold, the addition of lower cost mines, and contributions from copper assets acquired in the Placer Dome merger.