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Analyst opinions on stocks making headlines Wednesday
S&P UPGRADES OPINION ON SHARES OF CISCO SYSTEMS TO BUY FROM HOLD
From Standard & Poor's Equity Research
July-quarter EPS of 33 cents, vs. 28 cents one year earlier, misses our 34 cents estimate on higher operating expense, as Cisco invests for future growth opportunities. We concur with this strategy and see the company gaining market share through its end-to-end network solutions from stand-alone application vendors. Cisco raises its long-term annual sales growth target to 12%-17% from 10%-15%, as it is positioned to benefit from increasing network traffic trends. We are raising our 12-month target price by $7 to $36, 25X our $1.45 fiscal 2008 (July) EPS estimate, in line with peers./A.Bensinger
S&P MAINTAINS SELL OPINION ON SPRINT NEXTEL SHARES
Before amortization costs, Sprint posts second quarter EPS of 23 cents vs. 32 cents, 2 cents ahead of our estimate on lower interest expense. Revenues were weaker than we expected, with continued post-paid customer acquisition challenges on the wireless side. We believe data revenue growth was a bright spot for the wireless segment. EBITDA was stronger, aided by the small wireline segment, while in our view, the wireless margin remained sluggish. We think S faces challenges to restarting its wireless business. We maintain our 12-month target price at $18 and will update following the morning call./T.Rosenbluth
S&P UPGRADES RECOMMENDATION ON SHARES OF FANNIE MAE TO BUY FROM HOLD
Our upgrade reflects our view that Fannie is poised to benefit from a resurgent demand for agency-backed loans. The mortgage market is phasing out exotic products and returning to traditional fixed-rate loans. Although we are a bit concerned by Fannie's holding of subprime loans, we believe its strong liquidity will obviate a sale of these loans in secondary markets. Also, we think limits on Fannie's retained portfolio may soon be lifted in order to support the housing market. We are raising our 12-month target price $8 to $75, 1.7 times regulatory capital value per share, below past levels./S. Plesser
S&P MAINTAINS HOLD OPINION ON TOLL BROTHERS SHARES
Toll posts preliminary July-Q sales of $1.2B, down 21% from a year ago, but up 3% from April-quarter. Full results will be released Aug. 22, but current trends point to further weakness in the housing market as evidenced by Toll's net signed contracts decline of 31% from a year ago, as well as July-quarter cancellations rising to 24%, from second quarter's 19%. Pre-tax write-downs for land values are expected at $125M-$175M for the July quarter. Toll will no longer provide EPS guidance for fiscal 2007 (Oct.). We would hold Toll shares, given our view of its strong balance sheet. We will update after 2:00 p.m. ET conference call./K. Leon-CPA