Markets & Finance

S&P Picks and Pans: Goldman, Best Buy, BSX, Sprint, Adobe


Analyst opinions on stocks making headlines Tuesday

S&P REITERATES BUY OPINION ON SHARES OF GOLDMAN SACHS

From Standard & Poor's Equity Research

GS; $208.63

November-quarter EPS of $7.01 vs. $6.59 beats our $5.41 estimate. Revenues were helped by results in equity businesses, and hedges to offset exposures to troubled fixed income markets. Compensation costs were lower than we expected, but other costs rose due to global expansion efforts and expenses related to trading volume. Investment banking backlogs have come down, and we look for weaker results in fiscal 2008 (Nov.). We are reducing our fiscal 2008 EPS estimate to $19.92 from $20.49, but maintaining our 12-month target price of $250, 2.5X projected book value and a premium multiple to peers. /M. Albrecht

S&P REITERATES STRONG BUY RECOMMENDATION ON SHARES OF BEST BUY

BBY; $51.14

November-quarter EPS of 53 cents vs. 31 cents is 11 cents higher than our estimate. Same-store-sales increased 6.7%, better than our 4% projection, boosted by an additional post-Thanksgiving holiday shopping week. Video-gaming consoles, notebook computers, flat-panel TVs and GPS devices were in hot demand, driving total revenue growth of 17%. We think Best Buy continues to differentiate itself from peers due to its broad product assortment and customer-centric focus, with an attention to detail that few retailers can match. We will update after this morning's 10:00 am ET conference call. /M. Souers

S&P UPGRADES OPINION ON SHARES OF BOSTON SCIENTIFIC TO HOLD FROM SELL

BSX; $11.30

Although we continue to have fundamental concerns about the company and anticipate that additional asset sales will be required in order to reduce the significant level of debt incurred in the Guidant acquisition, we upgrade the stock based on valuation. BSX is currently trading 40% below its 52-week high of $18.69 reached in January, and has fallen under our 12-month target price of $12. In our view, BSX continues to face challenging conditions in the cardiac stent and implantable defibrillator categories. We still look for 2008 revenues of $8.6B and operating EPS of 50 cents. /R. Gold

S&P MAINTAINS HOLD OPINION ON SHARES OF SPRINT NEXTEL

S; $13.92

Sprint announces the appointment of Dan Hesse, former CEO of Embarq (EQ), as its new CEO. We believe that this is a step in the right direction as Sprint, in our opinion, needs new leadership to help rebuild its brand. While we view this as a positive, we also believe the company has several strategic decisions to make regarding new initiatives such as WiMax, and we remain concerned about the company's ability to stimulate subscriber growth in the near-term. We are lowering our 12-month target price by $2 to $16 to reflect our operational concerns. /J. Moorman, CFA

S&P MAINTAINS BUY RECOMMENDATION ON SHARES OF ADOBE SYSTEMS

ADBE; $40.90

We calculate November-quarter EPS of 45 cents vs. 30 cents, beating our estimate by 2 cents. Revenues grew 34% to $911 million, $22 million above our forecast on favorable demand for CS3 and forex benefit. Operating margins widened and we see further expansion in fiscal 2008 (Nov.). We are raising our fiscal 2008 revenue view by $52 million to $3.57 billion to reflect strong demand for CS3 and other new offerings. We see new products in August-quarter of fiscal 2008 offsetting typical seasonality in that quarter. We are lifting our fiscal 2008 EPS estimate by 2 cents to $1.68 and keeping our $51 target price, using a blend of relative and intrinsic measures. /Z. Bokhari

S&P DOWNGRADES OPINION ON SHARES OF TRUMP ENTERTAINMENT TO HOLD FROM BUY

TRMP; $4.52

On our concerns about a highly leveraged balance sheet and a weak consumer environment, we are widening our TRMP shares valuation discount to peers. We look for some improvement in Atlantic City as comparisons become easier in 2008; however, we believe struggling consumers will be a headwind. We still think there is untapped value in TRMP's undeveloped land holdings, but do not see a catalyst to unlock value at this time, amid weak capital markets. We are lowering our 12-month target price by $6 to $6. /E. Kwon, CFA


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