Markets & Finance

S&P Picks and Pans: Wrigley, Ford, Continental, Tyson Foods, Verizon


Analysts' opinions on stocks in the news Monday

From Standard & Poor's Equity ResearchS&P REITERATES HOLD RECOMMENDATION ON SHARES OF WRIGLEY (WWY; 76.63):

We look for proposed acquisition of WWY by privately owned Mars at $80 a share in cash to be completed within about the next 12 months. With WWY having only a modest chocolate business compared to Mars, we do not expect regulators to block the proposed deal. In our view, WWY shareholder approval is likely, especially with Wrigley family interests owning about 45% of super-voting Class B shares. We do not expect a higher bid to emerge. The $80 price is a premium at 32 times our 2008 EPS estimate. In view of the merger agreement, we are raising our target price for WWY to 80, from 62. -T. Graves, CFA

S&P REITERATES HOLD RECOMMENDATION ON SHARES OF FORD MOTOR (F; 8.16):

The shares opened higher on news Kirk Kerkorian's Tracinda Corp. plans an $8.50 per share cash offer for up to 20 million shares. Upon completion of the purchase, Tracinda would hold about 120 million shares, or a mid-single-digit stake. While the Ford family controls the company via its voting stake, Kerkorian's interest, combined with recent better-than-expected results could be a short term catalyst for share appreciation of the depressed stock. Cost cutting progress is evident, in our view, but we still seek evidence of Ford's product-driven resurgence in the U.S. -E. Levy, CFA

S&P REITERATES BUY OPINION ON SHARES OF CONTINENTAL AIRLINES (CAL; 17.22):

CAL chooses not to merge with United Airlines (UAUA; 15.20), or any other airline "at this time." We remain positive on the potential benefits of industry consolidation and we think a CAL/UAUA merger would have created a strong global route network with significant revenue synergies. That being said, we believe UAUA has significantly higher costs than CAL and integration would have been difficult. CAL can still benefit from capacity rationalization likely to come with industry consolidation. In our view, CAL needs to get costs down or revenues up in this high-oil environment. -J. Corridore

S&P REITERATES HOLD RECOMMENDATION ON SHARES OF TYSON FOODS (TSN; 18.50):

March-quarter loss per share of $0.02, vs. EPS of $0.19, is $0.03 narrower than our estimate. We see margins expanding as international beef markets reopen and end-product pricing improves. We believe the beef segment will see greater pricing power as the reopening South Korean market removes excess industry capacity. While we expect international pork demand to remain strong, we see chicken profitability remaining under pressure from high feed costs. Based on our view of improving beef market, we increase our fiscal year 2008 EPS estimate $0.25 to $0.35, and our p-e-based target price by 6 to 20. -J. Agnese

S&P MAINTAINS BUY OPINION ON VERIZON COMMUNICATIONS SHARES (VZ; 37.04):

VZ posts first quarter EPS of $0.61, vs. $0.54, $0.03 lighter than our estimate due to higher taxes and lower non-operating income. Revenues were slightly below our forecast but operating income was ahead. Wireless customer and revenue growth remained strong, as expected, with low churn and increasing data service revenues. In wireline, FiOS broadband was a positive, but we have concerns that traditional DSL barely added customers; access line pressure was as expected. We look to first quarter call to see if economic impact was muted, as we forecast, and will provide an update following morning call. -T. Rosenbluth


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