Markets & Finance

S&P Picks and Pans: Monsanto, Ford, CVS, COP, Tata Motors


Analyst opinions on stocks making headlines in Thursday's market

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF MONSANTO

From Standard & Poor's Equity Research

MON; $119.60

November-quarter EPS of 46 cents vs. 17 cents exceeds our 17 cents estimate, aided by revenue and margin gains at Monsanto's South American operations. With grain prices still strong as U.S. farmers look to the coming planting season, we look for 15% sales gains for fiscal 2008 (Aug.) and are also boosting our EPS estimate by 25 cents to $2.65. We also raise our 12-month target price by $28 to $120 on revised discounted cash-flow (DCF) and relative valuation models. However, with current valuation implying 20% annual free-cash flow growth for next ten years, we believe Monsanto's share price reflects the strength in its new-product pipeline. /K. Kirkeby, CFA

S&P REITERATES HOLD OPINION ON SHARES OF FORD MOTOR

F; $6.49

We find little solace in the company's December sales report. Headline number of Ford's year-to-year December sales volume decline at 9% masks the 13% decline in retail, as fleet sales declined just 1%. Cars dropped 8.4%, while light trucks fell 9.5%; and F-series sales were 22% lower. The one brand to post an increase was Volvo, up nearly 10%. With our 2008 forecasts for lower industry sales, reduced Ford marketshare and profit-depleting year-over-year reduction in first quarter North American vehicle production, we are cutting our 12-month target price by $1 to $8, based on peer-comparative price-to-sales ratios. /E. Levy, CFA

S&P REITERATES STRONG BUY OPINION ON SHARES OF CVS CAREMARK

CVS; $36.65

CVS reports that December comparable-store sales rose 1.8%, below our 4.0% forecast. We expect a weaker flu season, more difficult non-pharmacy comparisons, and a less favorable economic environment to continue to negatively impact near-term pharmacy and front-end sales performance. As a result, we are reducing our 2008 EPS estimate by 3 cents to $2.27 and our 12-month target price by $3 to $45 on comparative and forward P/E analysis. However, we continue to believe CVS remains well positioned to benefit longer-term as it realizes significant acquisition synergies. /J. Agnese

S&P REITERATES BUY RECOMMENDATION ON SHARES OF CONOCOPHILLIPS

COP; $88.68

In an interim update, and in line with our expectations, ConocoPhillips said it expected fourth-quarter oil and gas volumes will rise by about 60,000 barrels of oil equivalent per day (boe/d) from the third quarter, and that refining margins will narrow from the prior quarter. Based on our revised projections, we are increasing our fourth-quarter operating EPS estimate by 9 cents to $2.29, but cut our 2008 estimate by 6 cents to $8.82 and 2009's by 11 cents to $8.51. However, blending our DCF and relative valuations, we are raising our 12-month target by $7 to $104, representing an expected enterprise value of almost 12X our 2008 EBITDA estimate, a premium to peers. /T. Vital

S&P REITERATES HOLD OPINION ON SHARES OF TATA MOTORS

TTM; $19.71

The company's potential purchase of the Jaguar and Land Rover brands from Ford has both risks and potential rewards for the Indian automaker, in our view. Tata Motors should benefit from an increased global presence, greater prestige, and access to new technology. Also, it should be able to invest in the brands in ways Ford could not afford to. However, one risk is that finishing the turnaround at these brands could distract management and divert funds needed to focus on its growing home market where we see Tata Motors' light vehicle segment facing marketshare challenges. /E. Levy, CFA


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