Markets & Finance

S&P Picks and Pans: Coke, Sirius, First Solar, Deere


Analyst opinions on stocks making headlines in Wednesday's market

S&P REITERATES STRONG BUY RECOMMENDATION ON SHARES OF COCA-COLA

From Standard & Poor's Equity Research

KO; $59.44

Q4 operating EPS of $0.58 vs. $0.52 beats our view by $0.04 on stronger sales and better operating margin than we forecast. Worldwide case volume, up 5%, was a bit disappointing, slowing from recent 6% trend. Growth was negatively impacted by de-emphasis of low margin water, a strategy we view as favorable for profits, and in light of expansion opportunities for glaceau products globally. We see solid sales growth and wider operating margins as higher-profit products become a larger percent of sales and raise our '08 EPS estimate by $0.01 to $3.01. We keep our $72 target price. /E. Kwon, CFA

S&P MAINTAINS HOLD OPINION ON SHARES OF SIRIUS SATELLITE RADIO

SIRI; $3.17

Pre-announced 8.32M subscribers at end of '07 implies Q4 net adds of 654,309, somewhat sub-par given historical seasonal boost on NFL playoffs broadcast, we still see uncertain outcome of regulatory review of pending merger with XM Satellite (XMSR). While we believe the odds of regulatory approval have varied in recent months, perhaps partly on greater Congressional scrutiny, we would ultimately not be surprised by a Justice Dept. greenlight that may include some unprecedented conditions. SIRI will report Q4 results before market opens on February 26. /T.Amobi, CPA, CFA

S&P REITERATES HOLD OPINION ON SHARES OF FIRST SOLAR

FSLR; $222.18

Q4 EPS of $0.77 vs. $0.12 beats our forecast by $0.20, mostly on stronger-than-expected 281% revenue growth and 12% reduction in production costs per watt. Expansion into Malaysia also seems to be moving efficiently, as FSLR says slightly steeper ramp on its first plant causes it to expect higher total production this year. We are raising our '08 EPS estimate by $0.20 to $2.50 and setting '09 at $3.50. We think exceptional growth outlook merits premium valuation, but that much of it is already priced into FSLR. We are raising our target price by $42 to $238, 95X '08 estimate. /M. Jaffe

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF DEERE

DE; $85.22

Jan-Q EPS of $0.83 vs. $0.52 beats our $0.75 estimate. Revenue was above our forecast, reflecting continued strong demand in the global farm sector, helped by robust commodity prices and renewable fuel demand. We expect demand for global farm equipment to remain strong in 2008, while construction & forestry sales continue to be depressed by weak U.S. housing markets. DE expects revenues to rise 17% for FY 08 (Oct.) and net income to be $2.2 billion. We keep our FY 08 EPS estimate at $4.94 and our target price of $90, 18.2X that estimate, a traditional mid-cycle multiple for DE. /P. Wang

S&P MAINTAINS HOLD OPINION ON SHARES OF DIRECTV GROUP

DTV; $24.47

Q4 EPS of $0.30 vs. $0.29 is $0.01 shy of our estimate, $0.01 above Street's. Near-record low monthly churn helped Q4 net subscriber adds of 275,000, though competition and slowing economy seemed to weigh on gross adds. We see stronger U.S. pricing on HD-DVR, but also a factor in much higher costs than projected for subscriber acquisition, retention/upgrade. Meanwhile, DTV Latin America Q4 seemed solid. As HD battle escalates, DirecTV 11 primes for orbital launch in months. FCC okay of Liberty (LINTA 15.80, NR) (LCAPA 113.63, NR) stake seems near. We will update after p.m. call. /T. Amobi, CPA, CFA

S&P DOWNGRADES SHARES OF CAREER EDUCATION TO BUY FROM STRONG BUY

CECO; $18.10

CECO announces a restructuring, to address unproductive marketing and admissions costs and operating inefficiencies. We still see $0.90 EPS in '07, but we are trimming '08's by $0.10 to $1.20. Just after getting past negative factors such as a two year probation from the accreditor of its primary school and various regulatory issues, CECO now faces a tougher student loan environment, and apparently inefficiencies in its business model. We are trimming our target price by $7 to $24, 20X '08 estimate and about in line with peers, but still offering strong appreciation potential. /M. Jaffe


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