Markets & Finance

S&P Stock Picks and Pans: Comcast, NYSE Euronext, Fannie Mae, EDS


Analysts' opinions on stocks in the news

From Standard & Poor's Equity ResearchS&P MAINTAINS SELL OPINION ON COMCAST CLASS A SHARES (CMCSA; 18.77)

Shares opened lower today as CMCSA cuts 2007 target for cable revenue growth to 11% from 12%, on growth in revenue-generating units of 6 million (from 6.5 million), with 5% higher capex at $6 billion. We find this unsurprising, consistent with thesis for RGU growth slowing into 2008 amid more competition from existing players and new entrants. But with capex lately driven by success-based initiatives, we are wary of competitive developments that could foreshadow higher spending with potential adverse impact on long term free cash. We cut 12-month target price by $2 to $18 on revised enterprise value/EBITDA. - T.Amobi-CPA,CFA

S&P DOWNGRADES OPINION ON SHARES OF NYSE EURONEXT (NYX; 85.20) TO HOLD FROM BUY

Our downgrade reflects our belief that NYX will continue to lose market share in U.S. equities, and concerns regarding the longer-term impact on trading volumes from credit market dislocation and a flat or declining market. We also expect NYX to continue to be acquisitive, and we see a high probability that any deal will be dilutive to earnings. While we view NYX's valuation as attractive relative to peers, we do not see enough catalysts to support a buy recommendation. We are lowering our target price to $90 from $105, 26 times our 2008 EPS estimate, a discount to peers. - J.Willey

S&P MAINTAINS HOLD OPINION ON SHARES OF FANNIE MAE (FNM; 34.59)

FNM announces it is cutting its dividend 30% starting in the first quarter 2008 and issuing $7 billion in preferred stock this month. The move follows a similar issuance by Freddie Mac (FRE; 32.30) and likely stems from FNM's desire to add to its capital base amid the likelihood of ongoing losses. Given that at the end of the third quarter, FNM had over $2 billion in excess capital over OFHEO's requirement, we believe that the new issuance is partially a result of FNM's desire to tap the market for funds before it possibly seizes up. We are lowering our 12-month target price by $2 to $40, roughly 1.25 times book value. - S.Plesser

S&P REITERATES SELL OPINION ON SHARES OF ELECTRONIC DATA SYSTEMS (EDS; 20.99)

The shares are up over 5% this morning as EDS sets a $1 billion stock repurchase program for the next 18 months. The company will also continue to make organic investments and look for strategic acquisitions. At the end of the third quarter, EDS had over $3 billion in cash and a similar level of long-term debt, but in the past management has said they would be willing to further leverage the balance sheet. We do not think the buyback will have a notable positive impact on the shares in coming quarters and reiterate our sell opinion. Lastly, CEO Ron Rittenmeyer has been elected Chairman of the Board. - D.Cathers

S&P UPGRADES RECOMMENDATION ON SHARES OF PHOTRONICS (PLAB; 9.70) TO HOLD FROM SELL

PLAB posts October-quarter EPS of $0.01 vs. $0.21, short of our $0.02 estimate. Revenues fell 12%, driven by lower average selling prices for photomasks. We see margins reaching a trough in the January quarter but improving shortly thereafter, since we expect a production ramp at PLAB's Nanofab in the U.S. and a manufacturing plant in Asia. We are upgrading the shares to reflect our improved outlook on margins and stronger demand for flat panel displays. We are lowering our fiscal year 2008 EPS estimate by $0.09 to $0.46 but keep our 12-month $10 price target, applying a p-e multiple of 21.7 times to that estimate. - A.Zino-CFA

S&P UPGRADES SHARES OF EL PASO (EP; 16.09) TO HOLD FROM SELL, ON VALUATION

The shares have fallen to our target price of $16, which we are reiterating. EP files for approval of the Ruby Pipeline, a 680-mile gas pipeline originating at the Opal Hub in Wyoming and ending in Oregon. The project is attractive, given limited takeaway capacity in the Rockies, and would have initial capacity in 2011 forecast at 1.2 Bcf/d and may reach 2 Bcf/d. Also, EP agrees to acquire a 50% stake in Gulf LNG Clean Energy Project, expected to be placed in service in late 2011 at a total estimated cost of $1.1 billion. EP will pay $294 million in the first quarter 2008 and finance the rest. - M.Kay


Tim Cook's Reboot
LIMITED-TIME OFFER SUBSCRIBE NOW

Sponsored Financial Commentaries

Sponsored Links

Buy a link now!

 
blog comments powered by Disqus