Markets & Finance

S&P Picks and Pans: Continental, Dell, Tiffany, Marvell Technology, Novell


Analysts' opinions on stocks in the news Friday

From Standard & Poor's Equity ResearchS&P UPGRADES OPINION ON SHARES OF CONTINENTAL AIRLINES TO STRONG BUY FROM BUY (CAL; 14.45):

Upgrade reflects lower oil costs, share pullback and unconfirmed reports in the WSJ that CAL is near alliance with United Airlines (UAUA; 8.40), which we think could provide many advantages of a merger without integration headaches and labor disruption. We view CAL as one of the highest quality names in our airline universe. We like their international growth strategy out of Newark and think CAL will garner a revenue premium from business travelers. We lower our 35 target price to 30 - an enterprise value-to-EBITDA multiple of 7.5 times our 2009 EBITDA estimate, still above peers. -J. Corridore

S&P MAINTAINS BUY RECOMMENDATION ON DELL SHARES (DELL; 21.81):

Dell reports April-quarter EPS of $0.38, vs. $0.34, which is $0.02 above our estimate. Revenues rose 9%, led by notebook PCs. Strong overseas demand contrasted with "conservatism" in domestic IT spending. We think DELL is making good progress in its strategy overall, but there is more work ahead. Gross margin narrowed, but SG&A improved. Share buybacks were large, but debt increased. We are raising our EPS projections to $1.58 from $1.55 for fiscal year 2009 (January), and to $1.85 from $1.75 for fiscal year 2010. We are increasing our p-e-based 12-month target price by 2 to 28 for these volatile shares. -T. Smith, CFA

S&P REITERATES STRONG BUY RECOMMENDATION ON SHARES OF TIFFANY & CO. (TIF; 49.67):

TIF beats our $0.43 April-quarter EPS estimate, reporting $0.50 vs. $0.39. International strength offset U.S. weakness, as forex-adjusted sales and comps rose 8% and 3%, respectively. U.S. comps were flat; up 16% at New York flagship benefiting from foreign tourists, offset by a 4% comp decline at U.S. branch locations. Europe's 30% comp rise attests to growing international demand. We are lifting our fiscal year 2009 (January) EPS projection by $0.10 to $2.90 to reflect results. April-quarter supports our continued belief that TIF's strong brand heritage mitigates weak consumer spending trends. -M. Driscoll, CFA

S&P REITERATES HOLD RECOMMENDATION ON SHARES OF MARVELL TECHNOLOGY (MRVL; 17.36):

Adjusted April-quarter EPS of $0.17, vs. $0.03 loss, is well above our $0.08 estimate. Sales fell 5% from the fourth quarter on seasonality, but were higher than our model, reflecting healthy sales of wireless, storage, and system-on-a-chip products. A wider gross margin, also above our model, along with cost cuts, led to improved profitability. We now anticipate better growth on traction of new products and more efficient operations. We raise our fiscal year 2009 (January) EPS forecast by $0.22 to $0.56, and our 12-month target price by 7 to 20. But given today's price jump, we see growth almost reflected in prices. -C. Montevirgen

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF NOVELL (NOVL; 6.97):

April-quarter operating EPS of $0.04, vs. $0.02, beats our estimate by $0.01. Revenue rose 1.4% to $236 million, $3 million below our forecast, as open platform solutions revenue grew 31%, partly offset by flat revenue in NOVL's core business. Sales benefited from PlateSpin acquisition and favorable forex. Operating expenses were controlled, as operating margin expanded to 6% from 4%. We see revenue rising in low-single digits, with non-GAAP operating margin expanding to 7% in fiscal year 2008 (October.). We are raising our fiscal year 2008 operating EPS forecast by $0.01 to $0.16, and keeping our 12-month target price of 7. -J. Yin


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