Markets & Finance

S&P Picks and Pans: Ford, UAL, US Airways, Bear Stearns, U.S. Cellular, Coca-Cola Enterprises


Analysts' opinions on stocks in the news Wednesday

From Standard & Poor's Equity ResearchS&P MAINTAINS HOLD OPINION ON SHARES OF FORD MOTOR (F; 6.94):

In another sign of pressure on the domestic auto industry, Ford plans to cut about 10%-12% of its salaried employees, according to an unconfirmed report in the Detroit News. Unlike recent worker reductions in order to expedite the savings, this appears likely involuntary. The company, while growing outside the U.S., is suffering, in our view, from a rapidly shifting market place and a dearth of fuel efficient cars that consumers would prefer over the likes of the Toyota (TM; 97.80) Camry or the Honda (HMC; 31.60) Accord. Even with the layoffs, we see North American losses in 2009. -E. Levy, CFA

S&P REITERATES HOLD OPINIONS ON SHARES OF UAL CORP. (UAUA; 8.36):

Unconfirmed reports from Reuters and other outlets report talks between UAUA and US Airways have been put on hold, with labor integration among the sticking points. We think a merger would have allowed capacity and cost cuts that are necessary in a high fuel price environment. We are cutting our target price to 10 from 18, taking into account the likely absence of merger-related price support. We see high risk related to energy prices and rising losses at UAUA. But the shares have already dropped sharply this year, factoring in much of this risk, in our view. -J. Corridore

S&P REITERATES HOLD OPINION ON SHARES OF US AIRWAYS GROUP (LCC; 4.60):

Unconfirmed reports from Reuters and other media outlets say talks between LCC and United (UAUA; 8.50) are on hold. Among the sticking points is workforce integration. We thought a merger represented an opportunity to cut costs in a high fuel price environment. Near $130/barrel, oil is a drain on LCC's cash. We are cutting our 12-month target price to 6 from 8. LCC has little debt maturities or capex requirements over the next several years and we don't think bankruptcy is likely over the next year. Thus, we think the share price discounts much of the risk LCC faces. -J. Corridore

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF BEAR STEARNS (BSC; 9.35):

An unconfirmed report in the Wall Street Journal suggests that BSC plans to turn over trading records to the SEC to show that trading partners aggressively cut their exposure to the firm before its March collapse. The SEC is expected to attempt to determine if any inappropriate trading activity contributed to BSC's downfall. We think such cases are extremely difficult to prove, and we don't expect sanctions for the company's trading partners. We think shareholders will approve BSC's pending purchase by JP Morgan Chase (JPM; 42.30) at tomorrow's shareholder meeting. -M. Albrecht

S&P DOWNGRADES OPINION ON SHARES OF U.S. CELLULAR TO SELL FROM HOLD (USM; 61.00):

Our downgrade is based on subscriber concerns due to continued strong competition from the national players. Additionally, we believe that continued high retention costs to retain subscribers will weigh on margins. We are decreasing our 2008 EPS estimate by $0.07 to $2.85 and introducing our 2009 EPS projection of $2.91. We are reducing our 12-month target price by 6 to 58, based on a blend of our enterprise value/EBITDA and p-e peer analysis, which is a discount to peers due to our view of USM's slowing growth and increasing competition. -J. Moorman, CFA

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF COCA-COLA ENTERPRISES (CCE; 21.31):

CCE lowers its second quarter outlook and now forecasts an EPS decline in the mid to high single-digit range. The company cited weak volume performance in North America, particularly in higher margin 20-oz. units of sparking beverages and water. We cut our below-Street second quarter and 2008 EPS forecasts by $0.06 to $0.54 and $1.42, and our 2009 estimate by $0.15 to $1.55. We reduce our target price by $4 to $22, reflecting a p-e at the low-end of recent historical average. -E. Kwon, CFA


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