Markets & Finance

S&P Picks and Pans: Citigroup, GM, P&G, Garmin, Time Warner, International Paper, Wachovia


Analysts' opinions on stocks in the news Wednesday

From Standard & Poor's Equity ResearchS&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF CITIGROUP (C) 25.55):

Citigroup prices offering of $4.5 billion of common stock at $25.27, roughly 4% lower than yesterday's close. The sale comes on the heels of a $6 billion sale of preferred stock. Together, the additional capital should raise Citi's Tier 1 ratio to 8.6%, from 7.7% at the end of the first quarter. Given the recent strength of Citi's share price, we view raising capital as a prudent move, since it dilutes existing shareholders by only 3.2%. However, we are wary that Citi may be taking advantage of what it considers an overly attractive stock price. Our target price remains 26. -S. Plesser

S&P REITERATES HOLD OPINION ON SHARES OF GENERAL MOTORS (GM) 22.16):

Based on a preliminary report, GM posts adjusted loss of $0.62, vs. loss of $0.01, narrower than our $0.86 loss forecast despite lower production due to a strike against a supplier and a sizable loss at its GMAC unit. International improvement helped offset domestic growth. We expect global industry production to rise for the year, but lower GM production in North America should be a drag. We note that the Street expected a wider $1.54 first quarter loss. We will update after this morning's conference call. -E. Levy, CFA

S&P REITERATES STRONG BUY RECOMMENDATION ON SHARES OF PROCTER & GAMBLE (PG; 67.83):

PG posts March-quarter EPS of $0.82, vs. $0.74, a penny above our estimate. Upside results came in grooming, health care, snacks, coffee, pet care, baby care & family care, offsetting the lower beauty segment results than we had forecasted. We are reducing our June-quarter EPS estimate by $0.01 to account for continuing high commodity cost pressure, and thus are maintaining our fiscal year 2008 (June) $3.49 operating estimate. Our fiscal year 2009 EPS estimate remains $3.90 and excludes impact from a potential coffee business divestiture. We are keeping our 12-month target price of 80. -L. Braverman, CFA

S&P REITERATES STRONG BUY RECOMMENDATION ON SHARES OF GARMIN LTD. (GRMN) 40.79):

Excluding one-time items, first quarter EPS of $0.69, vs. $0.59, misses our estimate by $0.06. An unexpected tax rate rise to 19% against our 12% estimate accounted for the variance. Revenues grew at least 16% in each segment, though overall sales growth of 35% was below our expectations, reflecting a 58% revenue gain, less than we anticipated, in the auto segment. However, strong unit sales growth we see continuing led to cost efficiencies, resulting in a less-than-we-forecast operating margin compression of 209 basis points. We will provide a further update following the company's 11am ET call. -J. Peters, CFA

S&P MAINTAINS HOLD OPINION ON SHARES OF TIME WARNER (TWX) 15.27):

Before $0.01 one-time charge, first quarter EPS of $0.22, on 7% less shares, vs. $0.22, is $0.04 and $0.01 shy of S&P and Street estimates. We think Time Warner Cable (TWC; 27.60) offered the only bright spot: AOL posted a paltry 1% online ad gain (vs. 38% subscriptions drop), participations/New Line restructuring weighed on film unit, and TNT programming costs rose. CEO Bewkes alludes to imminent "complete structural separation" of TWC; to finalize details soon. TWX affirms 2008 target of 7%-9% adjusted EBITDA growth and EPS of $1.07-$1.11, and revises free cash to near $4.5 billion. -T. Amobi, CPA, CFA

S&P REITERATES HOLD RECOMMENDATION ON SHARES OF INTERNATIONAL PAPER (IP) 26.05):

IP reports first quarter EPS of $0.41, vs. $0.45, well below our $0.54 forecast. Revenues rose nearly 9% on gains in all segments, largely the result of price increases and growth in overseas markets. However, input costs increased dramatically in the quarter and penalized EPS by $0.24. We see raw materials and energy costs as a continuing headwind in 2008, and we have reduced our full year EPS forecast to $2.00 from $2.50. We lower our 12-month target price to 30 from 33 to reflect our reduced outlook. -S. Benway, CFA

S&P MAINTAINS SELL OPINION ON SHARES OF WACHOVIA (WB; 29.04):

WB will take an $800 million to $1 billion non-cash second quarter charge based on a recent accounting ruling regarding some of its leasing transactions. The transactions will eventually be recognized as income over a 30-40 year period. Accordingly, we are reducing our second quarter and 2008 EPS estimate by $0.30 each, to $0.29 and $1.61, respectively. Separately, we have an unfavorable view of WB's recent $144 million settlement related to its connection to a telemarketing fraud scheme. We believe the incident points to questions regarding WB's operational controls. We keep our target price of 25. -S. Plesser


The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW

Sponsored Financial Commentaries

Sponsored Links

Buy a link now!

 
blog comments powered by Disqus