Markets & Finance

S&P Picks and Pans: Microsoft, CS Group, Micron, Norfolk Southern


Analyst opinions on stocks making headlines Wednesday

S&P REITERATES STRONG BUY RECOMMENDATION ON SHARES OF MICROSOFT

From Standard & Poor's Equity Research

MSFT; $29.61

Microsoft announces three new models for its Zune multimedia player product line. Two feature a smaller, sleeker design with flash memory. The third has a larger hard drive and includes wireless transfer capability, a 3-inch screen, and built-in FM radio. Although we believe these represent improvements over earlier models, we are skeptical that Zune will make significant inroads into the dominant market share of Apple (AAPL), which recently announced new iPods that have screens 3.5-inch wide and Wi-Fi Internet connectivity. /J. Yin

S&P MAINTAINS STRONG BUY RECOMMENDATION ON AMERICAN DEPOSITARY SHARES OF CREDIT SUISSE GROUP

CS; $68.98

We view CS's announcement that third quarter net profit will be within a 20% band of 1.3 billion Swiss francs as an indication that its profits are proving more resilient amid current market conditions than are those of competitors. We think underlying profitability and expense control at CS has improved. However, our forecasts now project some decline in investment banking revenues in 2007 and 2008. We are therefore reducing our 2007 continuing EPS estimate to $7.03, from $7.19 and our 2008 EPS estimate to $6.84 from $7.48. We are reducing our 12-month discounted free cash-flow-based target price by $6 to $82. /D. Chambers

S&P REITERATES HOLD OPINION ON SHARES OF MICRON TECHNOLOGY

MU; $11.79

Micron posts August-quarter operating loss per share of 19 cents vs. EPS of 8 cents, narrower than our 29 cents loss estimate. Sales rose 11% from May-quarter as strong bit-growth outweighed lower selling prices. Higher gross margins and staff reductions led to better operating margin than May-quarter, though still negative. Although we see falling unit costs and more efficient operations, we remain concerned about DRAM prices over next few quarters, and would not add to positions. We are cutting our fiscal 2008 (ending August) EPS estimate 10 cents to 19 cents, but keeping our 12-month target price of $14 on price/sales analysis. /C. Montevirgen

S&P REITERATES HOLD RECOMMENDATION ON SHARES OF NORFOLK SOUTHERN

NSC; $51.29

Based on recent industry data, we are turning slightly more cautious toward Norfolk. We now see third quarter carloadings down more than 3%, rather than flat, and believe weakening intermodal and coal volumes likely more than offset automotive shipments, which are expected up for first time in seven quarters. We are trimming our third quarter EPS estimate by 5 cents to $1.04, full 2007's by a similar amount to $3.75. However, we keep 2008's at $4.27, since we see volumes benefiting from recent service additions, and maintain our 12-month target price at $57 based on our blend of discounted cash-flow and p-e valuations. /K. Kirkeby-CFA


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