Markets & Finance

S&P Picks and Pans: Boeing, IP, Monsanto, Alcoa, Nokia


Analyst opinions on stocks making headlines Wednesday

S&P DOWNGRADES SHARES OF BOEING TO BUY FROM STRONG BUY

From Standard & Poor's Equity Research

BA; $98.75

Boeing now sees first delivery of its new 787 in

Nov.-Dec. 2008, compared with prior May 2008 expectation. We believe the delay reflects the complexity of the airplane, a tight aerospace parts market, and BA's extensive use of suppliers for the 787. While we now see more risk, we also see BA's commercial airplane backlog of over $207B as a major asset, particularly given recent problems at competitor Airbus (EAD.PA). We are reducing our 12-month target price by $4 to $118 on our view that delivery delays will reduce near-term free cash flow. However, we continue to view Boeing shares as attractive. / R. Tortoriello

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF INTERNATIONAL PAPER

IP; $36.33

We are reducing our third quarter EPS estimate for IP to 60 cents from 65 cents to reflect lower expected land sales, the timing of which can be uncertain. However, we are maintaining our full 2007 EPS forecast of $2.15 to reflect improved pricing and steady demand in both the packaging and printing papers segments. In 2008, we expect IP to benefit from the investments it has made in overseas markets, and our EPS projection remains $2.50. We believe these shares are appropriately valued and maintain our 12-month target price of $41. /S. Benway, CFA

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF MONSANTO

MON; $88.80

August-quarter per-share seasonal loss of 18 cents vs. 21 cents is in line with our estimate. Revenues rose 13%, while gross profit was up 36%, including acquisitions. Monsanto's initial outlook for fiscal 2008 (Aug.) of $2.20-$2.40 EPS is modestly below Street expectations; however, we are boosting our estimate by 14 cents to $2.40. With grain prices remaining strong, we see farmers reaching for additional yield by planting more seeds with premium traits. Based on revised discounted cash-flow and relative valuations, we raise our 12-month target price by $10 to $92. /K. Kirkeby, CFA

S&P REITERATES HOLD OPINION ON SHARES OF ALCOA INC.

AA; $39.72

Alcoa posts third quarter EPS of 64 cents vs. 62 cents on a 3.2% sales decrease, shy of our 73 cents estimate on greater-than-expected margin erosion in alumina and aluminum. We are reducing our 2007 EPS estimate to $2.76 from $2.90 to reflect the third quarter shortfall and our view for a weak fourth quarter. But assuming less margin contraction and firmer end markets, we maintain our 2008 EPS view of $2.85. Longer-term EPS growth should be supported by Alcoa's expanded share buyback, the divestment of low margin businesses, and production from new lower cost plants. We keep our 12-month target price at $40. /L. Larkin

S&P MAINTAINS SELL OPINION ON AMERICAN DEPOSITARY SHARES OF NOKIA

NOK; $36.69

Ahead of third quarter results to be reported October 18, we forecast Nokia sales of €12.9 billion and EBIT of €1.5 billion, below consensus expectations. However, we project Nokia's market share will reach 40% in the third quarter, up from 38.5% in the second quarter. For mobile phones, we estimate sales growth at 3.7%. We expect Nokia will be able to keep EBIT margins at a level of 20.5% in both its handset and multimedia groups. Even so, we continue to find Nokia's ADSs unattractive, since we would see them as fully valued at our 12-month target price of $32, based on our discounted cash-flow analysis. /I. Soderbom


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