Markets & Finance

S&P Picks and Pans: Deere, Freddie Mac, Applied Materials, IAC/InterActiveCorp


Analysts' opinions on stocks in the news Wednesday

From Standard & Poor's Equity ResearchS&P REITERATES HOLD OPINION ON SHARES OF DEERE (DE; 84.46):

April-quarter EPS of $1.74, vs. $1.36, is $0.04 above our forecast, driven mostly by very strong gains in DE's agricultural segment, particularly in foreign markets. However, the shares are off 6% this morning, in our view because investors are disappointed that DE did not lift fiscal year 2008 (October) EPS guidance, which was near our forecast but below Street's. We are trimming our projection by $0.05 to $5.00, but still see $5.75 in fiscal year 2009. We continue to see DE being boosted by strong farm markets, offset partly by the impact of weak U.S. residential markets. Our target price remains 90. -M. Jaffe

S&P MAINTAINS HOLD OPINION ON SHARES OF FREDDIE MAC (FRE; 24.96):

Shares are higher in pre-market trading after FRE posts first quarter loss of $0.66, vs. loss of $0.35, $0.43 narrower than our loss forecast on significantly lower mark-to-market losses on credit guarantees. But FRE's provision for credit losses was slightly higher than expected at $1.2 billion; 32% higher than the fourth quarter. Guarantee income rose 13% from the fourth quarter, on a higher total guarantee fee rate. In a move we view as positive, FRE will raise $5.5 billion through new common and preferred stock to protect against losses and capture more business at higher spreads. We will update after conference call. -K. Cole-CFA

S&P REITERATES BUY RECOMMENDATION ON SHARES OF APPLIED MATERIALS (AMAT; 19.86):

AMAT posts April-quarter operating EPS of $0.24, vs $0.34, above our $0.22 estimate. While we see weakness in AMAT's Silicon segment, due to push-outs from DRAM and NAND flash customers, we project a better supply/demand balance in the second half of fiscal year 2008 (October) and think the cyclical bottom is near. We see Display segment orders resulting in higher sales by the end of fiscal year 2008 and expect AMAT's solar related business to reach breakeven in fiscal year 2009. We cut our fiscal year 2008 operating EPS estimate by $0.28 to $0.76 and fiscal year 2009's by $0.24 to $1.09, but raise our target price by 2 to 23, applying a peer-premium p-e. -A. Zino-CFA

S&P REITERATES BUY OPINION ON SHARES OF IAC/INTERACTIVECORP (IACI; 23.00):

IACI announces that major minority shareholder Liberty Media (LINTA; 16.00) will no longer oppose the proposed spin-offs of HSN, Interval, Ticketmaster and LendingTree. IACI won a related court decision in March, but LINTA had recently taken steps to appeal. We now believe the spin-offs will likely be completed during the third quarter, perhaps as early as August, in keeping with the timeframe IACI laid out two weeks ago during its first quarter conference call. This is consistent with our prior view, but we are encouraged by the greater certainty related to the spin-offs. -S. Kessler


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