Markets & Finance

S&P Picks and Pans: Bank of America, National City, Mattel, Hasbro, Merck, Eli Lilly


Analysts' opinions on stocks in the news Monday

From Standard & Poor's Equity ResearchS&P DOWNGRADES SHARES OF BANK OF AMERICA TO HOLD FROM BUY (BAC; 37.87):

We believe Bank of America will need to continue an elevated level of loss provisions, based on rising net chargeoffs and non-performing assets. Securities writedowns, at $2.6 billion in the first quarter, will likely decline in coming quarters. However, we continue to be wary of BAC's exposure to high-risk assets. On the positive side, BAC should post solid loan growth as it adds marketshare. Based on higher provisions, we are lowering our 2008 EPS estimate by $0.71 to $2.55, and cut our target price by 2 to 40. At 12.3 times our 12-month forward estimate of $3.25, this is slightly above historical average. -S. Plesser

S&P DOWNGRADES OPINION ON SHARES OF NATIONAL CITY TO HOLD FROM BUY (NCC; 8.33):

According to an unconfirmed report in today's Wall Street Journal, NCC may soon accept a $6 billion capital infusion from private equity fund Corsair Capital. Based on the reported terms of this deal, the investors will then hold a 9.9% stake in NCC, paying about $5 per share, a price that is well below Friday's closing price of $8.33, and below what we had expected for any such deal. We are reducing our 12-month target price by 3 to 7, based on a steep discount-to-peers multiple of 4.3 times our 2009 EPS estimate of $1.63, or 0.33 times times book value. Shares are indicated lower. -E. Oja

S&P LOWERS OPINION ON SHARES OF MATTEL TO HOLD FROM STRONG BUY (MAT; 21.78):

Mattel reports a first quarter loss per share of $0.13, vs. $0.03 EPS, wider than our $0.03 loss estimate, on a 11% decline in domestic sales, only partially offset by a 8% international gross increase. Both reports were below our estimates. Though we still expect meaningful international growth will support results, we have some concerns after the Fisher-Price segment declined 13%, which included a 4% currency benefit. Overall, we are reducing our forecasts and now expect EPS of $1.54 in 2008, down from $1.69. We cut our 12-month target price to 24 from 27, based on updated relative analysis. -E. Kolb

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF HASBRO (HAS; 34.72):

Hasbro announces first quarter EPS of $0.25, vs. $0.19, and well above our $0.11 estimate, as Transformers and other core brands continued to drive performance. Domestic sales increased 6%, while international grew 22%, both better than our expectations. We expect HAS to continue to execute well in 2008, leading to the key holiday season, but note comparisons may prove difficult against sales of toys associated with a number of blockbuster movies last year. We are raising our 2008 EPS estimate to $2.14 from $1.89 and our 12-month target price to 35 from 30 based on our updated analyses. -E. Kolb

S&P MAINTAINS HOLD OPINION ON SHARES OF MERCK & CO. (MRK; 39.43):

First quarter operating EPS of $0.89, vs. $0.84, is four cents above our forecast despite sales modestly lower than we projected. A higher-than-expected gross margin was aided by the consolidation of manufacturing plants and a favorable product mix shift, and we think more margin gains are possible. U.S. sales of Zetia fell 3% while Vytorin fell 7%, reflecting the impact of unfavorable clinical trial data. We see further declines ahead, but look for offsets from Cozaar/Hyzaar, Fosamax and vaccine sales. We keep our 2008 sales estimate at $24.2 billion, EPS at $3.25, and target price at 45. - H. Saftlas, R. Gold

S&P MAINTAINS BUY OPINION ON SHARES OF ELI LILLY (LLY; 49.73):

First quarter operating EPS of $0.92, vs. $0.84, is $0.05 below our estimate. Pro forma sales rose 12% (6% volume, 1% price, and 5% forex) on strength in Cymbalta (+37%) and Alimta (+32%), partly offset by slower-than-expected growth in Zyprexa (+1%) and Byetta (15%). Pricing was hurt by generic competition in Canada and Germany. SG&A costs were higher than we expected, reflecting increased marketing for key drugs. We see several key catalysts for LLY in 2008 including June 26 Prescription Drug User Fee Act date for Prasugrel and Cymbalta filing for fibromyalgia. Our target price is 57. - H. Saftlas, J.Loo-CFA


Best LBO Ever
LIMITED-TIME OFFER SUBSCRIBE NOW

Sponsored Financial Commentaries

Sponsored Links

Buy a link now!

 
blog comments powered by Disqus