Markets & Finance

S&P Picks and Pans: Corning, Clorox, Garmin, RealNetworks


Analyst opinions on stocks making headlines Wednesday

S&P MAINTAINS STRONG BUY OPINION ON SHARES OF CORNING

From Standard & Poor's Equity Research

GLW; $24.33

We believe today's FCC ruling that would ban exclusive agreements that cable operators have with apartment buildings is a positive for Corning. We believe the decision could accelerate the fiber deployment plans for key customer Verizon Communications (VZ) and see Corning's unique bendable fiber equipment as best suited for use in these multi-dwelling units. We look for higher telecom equipment sales to augment the growth we see for Corning's LCD products in 2008. We leave our 12-month target price unchanged at $31, based on relative P/E analysis. /T. Rosenbluth

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF CLOROX

CLX; $62.77

Clorox posts in-line September-quarter EPS of 76 cents vs. 73 cents. Primarily to reflect price increases and a tax rate guidance change, we are increasing our full-year fiscal 2008 (June) EPS estimate by 7 cents to $3.41 despite continuing high commodity cost pressures. We view Clorox's intended acquisition of Burt's Bees, a natural personal care products company, as a positive, potentially accretive to EPS starting in fiscal 2009, excluding one-time costs. Rolling our valuation forward to our calendar year 2008 EPS estimate of $3.67, we are increasing our 12-month target price by $3 to $68. /L. Braverman, CFA

S&P MAINTAINS BUY RECOMMENDATION ON SHARES OF GARMIN INTERNATIONAL

GRMN; $115.39

Excluding foreign currency effect, third quarter EPS of 89 cents vs. 50 cents beats our estimate by 6 cents. Revenue growth of 79% beat our 72% forecast as auto segment revenues more than doubled. Less-than-expected price declines for personal navigation devices contributed to a narrower-than-expected operating margin contraction of 26 basis points to 29.4%. Despite the strong results, shares are down 5% this morning we believe on Garmin's 2.3 billion euro ($3.3 billion) bid to acquire map supplier Tele Atlas (TA.AS). We will update after the 11 am ET conference call. /J. Peters, CFA

S&P REITERATES HOLD OPINION ON SHARES OF REALNETWORKS

RNWK; $6.85

Including the impact of stock-based compensation and excluding numerous one-time and non-cash items, the company posts third quarter EPS of 3 cents vs. 3 cents, 2 cents above our forecast. Revenues rose 55%, reflecting the positive impact of acquisition activity, with continuing strength in the core music and games categories. We view RealNetworks' music business and recent transaction with MTV as relatively attractive, its games assets as compelling, growing mobile opportunities as notable, and the balance sheet as strong. However, we see increasing RealNetworks complexity and competition as considerable challenges. /S. Kessler

S&P DOWNGRADES SHARES OF REGIONS FINANCIAL TO HOLD FROM BUY

RF; $26.88

Our downgrade is based on Regions' exposure to a deteriorating residential real estate market. Close to 70% of its loan portfolio is exposed to residential real estate, with some concentration in the Florida markets. Although non-performing loans were flat in the third quarter, a positive in comparison to other regional banks, we are concerned that further home price declines will lead to the need for higher provisions. As a result, we are lowering our 12-month target price $3 to $29, 10.4X our 2008 EPS estimate of $2.82, a discount to peers, to reflect the company's residential real estate exposure. /S. Plesser


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