Markets & Finance

S&P Picks and Pans: AIG, Microsoft, Yahoo, RIMM, Hasbro


Analyst opinions on stocks making headlines in Monday's market

S&P DOWNGRADES AMERICAN INTERNATIONAL GROUP OPINION TO SELL FROM BUY

From Standard & Poor's Equity Research

AIG; $45.14

AIG disclosed in an 8-K filing this morning that its auditors found a "material weakness" in how the company values its credit default swap portfolio. As a result, AIG has not yet released its year-end 2007 financial statements and has not disclosed when it plans to do so. We find this development very troubling, and believe AIG management will have an extremely difficult time regaining investor confidence. Our $43 target price, cut today by $26, assumes stock trade at 1.1X estimated 2008 tangible book value, a discount to peers that we think warranted in light of these disclosures. /C. Seifert

S&P REITERATES STRONG BUY RECOMMENDATION ON SHARES OF MICROSOFT

MSFT; $28.56

According to an unconfirmed report in the Wall Street Journal, Yahoo's board rejected Microsoft's $31/share takeout offer as inadequate and said it would not accept anything less than $40. Yahoo also seeks a breakup fee if the deal is blocked by the regulators. We view this development as part of a negotiation process to fetch a higher bid. Although Microsoft could raise its offer, we think it is unlikely the bid would reach $40. We believe Microsoft will either sweeten its offer or try to bolster its case by appealing to shareholders at the next Yahoo shareholder meeting. /J. Yin

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

YHOO; $29.20

The Wall Street Journal, among other news sources, indicates in an unconfirmed report that Yahoo is poised to reject Microsoft's unsolicited takeover offer valued initially at $31/share. The Times of London speculates in an unconfirmed report that Yahoo is pursuing merger talks with Time Warner's (TWX) AOL unit to defend itself. Yahoo had indicated it would consider other options. However, we think shareholders will try to force the company to sell to Microsoft for a price higher than $31, and this is how we ultimately expect this situation to conclude. /S. Kessler

S&P MAINTAINS BUY OPINION ON RESEARCH IN MOTION SHARES

RIMM; $89.71

At this week's Mobile World Congress in Spain, we believe the key theme will be how smartphones and multi-media devices can help to drive telecom service usage by consumers higher. Already we have seen the launch of a number of Internet capable devices by handset makers that include Nokia (NOK) and Motorola (MOT) ; the latter exploring the sale of its handset segment. As the smartphone market grows more mainstream, we believe RIMM is well positioned with its diverse handset lineup and strong relationships with various carriers across the globe. /T. Rosenbluth

S&P MAINTAINS HOLD OPINION ON SHARES OF HASBRO

HAS; $26.40

Fourth-quarter EPS of 84 cents, on 8% fewer shares outstanding, vs. 62 cents one year earlier, beats S&P's estiame by one cent and the Street's by 3 cents. Key geographic segments and products, including Transformers, Marvel lines, Littlest Pet Shop and My Little Pony helped drive strong 15% North America revenue growth, 24% for international (in constant currency). After $587 million of 2007 share buybacks, we note Hasbro recently raised its repurchase plan by $500 million and its quarterly dividend by 25% to 20 cents per share. Risk factors we see include a 2008 consumer spending slowdown and tough comparisons with prior-year quarters. Our target price remains $30, a P/E in line with toy industry peers and S&P 500. /E. Kolb

S&P RETAINS STRONG BUY OPINION ON SHARES OF CARLISLE COMPANIES

CSL; $36.97

Carlisle posts fourth-quarter EPS of 66 cents, vs. 61 cents one year earlier, well ahead of our 54 cents estimate. Sales growth from continuing operations was what we viewed as a solid 4%, and construction materials led the way with a 6.6% sales gain and a 15% EBIT increase. We think Carlisle is poised to produce good EPS growth in 2008 despite a weak economy. Backlogs are strong in certain businesses, construction materials should benefit from replacement sales, and acquisitions provide expansion potential. We are increasing our 2008 EPS estimate to $3.25 from $3.10 and our 12-month target price to $46 from $43. /S. Benway, CFA


Tim Cook's Reboot
LIMITED-TIME OFFER SUBSCRIBE NOW

Sponsored Financial Commentaries

Sponsored Links

Buy a link now!

 
blog comments powered by Disqus