Markets & Finance

S&P Picks and Pans: Ford, NetApp, Pfizer, GameStop, Burger King


Analysts' opinions of stocks in the news Thursday

From Standard & Poor's Equity ResearchS&P MAINTAINS HOLD OPINION ON SHARES OF FORD MOTOR (F; 7.24):

Ford to cut production of trucks for balance of 2008; no longer expects North American operations to be profitable in 2009, despite being on target for $5 billion cost-reduction plan. This news does not surprise us, as we have expressed doubts about Ford's ability to meet its 2009 North American profitability goals. Weakness in the overall U.S. market, flirtation with $4/gallon gas pump prices and the dramatic shift in demand from pickup trucks and SUVs - the key source of Ford's profits - will weigh on results. But we note car production is set to rise and we see improved profits outside U.S. -E. Levy-CFA

S&P REITERATES HOLD OPINION ON SHARES OF NETAPP (NTAP; 25.79):

After (prior story said before) the impact of stock-based compensation, April-quarter EPS of $0.26, vs. $0.23, is $0.01 below our forecast, partly due to lower net and other income and a higher tax rate than we projected. Revenues rose 17%, modestly above our forecast, aided by forex, owing largely to strength in Europe. We are lowering our fiscal year 2009 (April) EPS estimate to $0.94 from $1.07 to reflect expected notable investments and a higher tax rate. The shares are lower in pre-market trading, as NTAP indicated such investments would restrain EPS growth somewhat over the first half of fiscal year 2009. -S. Kessler

S&P REITERATES HOLD OPINION ON PFIZER SHARES (PFE; 19.73):

The Institute for Safe Medications, a watchdog group, put out a report citing a large list of safety risks linked with PFE's new Chantix smoking-cessation drug. The FAA also banned pilot use of the drug. However, we believe FDA has been aware of these risks, and they are largely reflected in new restrictive labeling changes. Even so, given ongoing negative press, we are lowering our 2012 projection for Chantix sales to $1.6 billion from $2 billion. We still expect PFE to meet near term EPS growth goals, helped by cost restructurings, and we keep our 23 target price. Dividend yield is 6.5%. -H. Saftlas

S&P RAISES RECOMMENDATION ON SHARES OF GAMESTOP TO BUY FROM HOLD (GME; 46.21):

Excluding one-time items, April-quarter EPS of $0.39, vs. $0.18, is $0.05 higher than our estimate. Comp-store sales grew an impressive 27%, well above our 18% projection, driven by sales of new software titles such as Grand Theft Auto IV. We expect continued strong margin gains as product mix shifts from hardware to new and used software, and are increasing our fiscal year 2009 (January) and fiscal year 2010 EPS operating forecasts to $2.40 and $2.90 from $2.33 and $2.86. We are keeping our DCF-based target price of 60, and would advise investors to take advantage of this morning's sell-off to add to positions. -M. Souers

S&P LOWERS RECOMMENDATION ON SHARES OF BURGER KING HOLDINGS TO HOLD FROM BUY (BKC; 28.40):

We are raising our forecasts of food, labor and energy cost increases in our fiscal year 2009 (June) projections, leading us to reduce our EPS estimate by $0.10 to $1.40. However, we have increased our assumptions regarding menu price hikes by 2%, leading us to raise our fiscal year 2009 revenue growth forecast to 6.9% from 4.3%. We also note a recent secondary offering of 15 million shares, through which major investors sold their shares for $27.41 each, below the current market price. On our revised DCF model, we reduce our target price by 2, to 32, and now see BKC as fairly valued. -M. Basham


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