Markets & Finance

S&P Picks and Pans: 3Com, Yum, Chipotle, Pulte, Jabil


Analyst opinions on stocks making headlines Friday

S&P MAINTAINS HOLD OPINION ON 3COM SHARES

From Standard & Poor's Equity Research

COMS 4.98

3Com confirms earlier reports that after reviewing a number of options, it has agreed to be sold to private equity firm Bain Capital Partners, pending necessary approvals, at $5.30 a share in cash. The decision to sell comes only six months after 3Com spent $882 million to acquire full ownership of a Chinese enterprise networking joint venture. We are raising our target price by $1.50 to $5.50 to reflect the terms of the deal, which we see closing in early 2008. At our target price, 3Com would trade at a discount to peers on a price/sales basis, reflecting challenges that we see. /A. Bensinger, T. Rosenbluth

S&P RAISES OPINION ON SHARES OF YUM! BRANDS TO BUY FROM HOLD

YUM 33.77

The shares have traded in a tight range over the past six months, which we attribute to cross currents of negative publicity from domestic store food safety incidents, set against strong international results. We think that while the negative incidents may not be forgotten, upcoming U.S. results will be strong compared to year-ago results that were affected by the incidents, while international remains strong on weaker dollar. We are increasing our 2007 EPS estimate by a penny to $1.65 and 2008's by 5 cents to $1.90. On revised DCF analysis, we raise our 12-month target $5, to $41. /M. Basham

S&P DOWNGRADES SHARES OF CHIPOTLE MEXICAN GRILL TO HOLD FROM BUY

CMG 118.57

Shares of Chipotle have risen 34% since announcing much stronger than expected second-quarter earnings on July 31. We think the shares now fairly reflect strong sales and earnings growth prospects that we see for the company. We are raising our 12-month target price by $9 to $125, to reflect change to 2008 from 2007 as the base year in our discounted cash flow analysis. We note that although Chipotle has no locations outside the U.S. currently, and has what we view as ample domestic growth opportunities, we think that over the next several years it may make its initial foray into foreign markets. /M. Basham

S&P UPGRADES SHARES OF PULTE HOMES TO HOLD FROM SELL

PHM 13.42

The shares are trading below what we calculate as fair value, a 12-month target price of $14 based on 0.7 times our forward net tangible book value estimate. In our opinion, asset impairment charges are likely for the next two quarters, but we note that Pulte booked a significant charge in the second quarter, and we believe the company has taken strong measures to reduce costs and boost cash flows. As a large homebuilder with a high mix of adult communities, Pulte is targeting $1 billion in cash by year end. We believe this would allow it to take advantage of a housing recovery that we see in the second half of 2008. /K. Leon, CPA

S&P MAINTAINS HOLD OPINION ON SHARES OF JABIL CIRCUIT

JBL 22.93

Jabil posts August-quarter EPS of 6 cents (29 cents before restructuring, stock-based compensation and other charges) vs. a loss per share of 22 cents (non-GAAP EPS 36 cents). We see a mixed picture for this electronic manufacturing services provider. Acquisitions and restructuring are adding near-term costs but should ultimately aid margins, in our view. Inventories fell from a year ago, but long term debt doubled. We estimate fiscal 2008 (ending August) operating EPS of $1.33, before restructuring charges. We are maintaining our 12-month target price of $25, which is based on p-e analysis. /T. Smith, CFA


Toyota's Hydrogen Man
LIMITED-TIME OFFER SUBSCRIBE NOW

Sponsored Financial Commentaries

Sponsored Links

Buy a link now!

 
blog comments powered by Disqus