Markets & Finance

S&P Picks and Pans: AIG, Take-Two, National Semiconductor, Quiksilver, Molson Coors


Analysts' opinions on stocks in the news Friday

From Standard & Poor's Equity ResearchS&P MAINTAINS HOLD OPINION ON SHARES OF AMERICAN INTERNATIONAL GROUP (AIG; 36.41):

Unconfirmed reports in the Wall St. Journal and other media outlets state the SEC is investigating the way AIG accounted for credit default swap contracts linked to subprime mortgages. This latest piece of unsettling news heightens our concern that the current management team may not be able to successfully navigate this storm. Longer term, we see value in the AIG franchise, but we expect current turmoil to limit upside in the shares and we would not add to positions. Our 42 target price (9.4 times our $4.45 2009 EPS estimate) assumes shares stay discounted to historical averages. -C. Seifert

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF TAKE-TWO INTERACTIVE SOFTWARE (TTWO; 27.65):

TTWO posts April-quarter EPS of $1.29, vs. a loss of $0.71, exceeding our EPS estimate of $0.97. Revenues rose 162% to $540 million, $50 million above our forecast, on the successful launch of Grand Theft Auto IV. Results were aided by effective cost control and a lower-than-expected tax rate. In addition to GTA IV sales momentum, we forecast increased traction for 2K8 sports video games. We are lifting our fiscal year 2008 (October) EPS projection by $0.36 to $1.27, and keeping our 12-month target price of 28, based on our belief that TTWO and Electronic Arts (ERTS; 49.50) will complete a merger near that price. -J. Yin, A. Zino, CFA

S&P REITERATES HOLD OPINION ON SHARES OF NATIONAL SEMICONDUCTOR (NSM; 22.66):

Adjusted May-quarter EPS of $0.33, vs. $0.27, is $0.04 above our estimate. Revenues exceeded our view, rising 2% from February-quarter, as sales to mobile customers were better than our forecast. Gross margin also beat our model, widening on a better sales mix and cost cuts. With effective operating expense containment, operating margin expanded. We raise our fiscal year 2009 (May) EPS forecast $0.17 to $1.51 to reflect higher margin guidance and our view of more efficient operations, and lift our target price by 2 to 26. But we remain cautious on sales growth given current wireless handset market trends. -C. Montevirgen

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF QUIKSILVER (ZQK; 9.66):

ZQK reports April-quarter EPS from continuing operations of $0.30, vs. $0.25, in line with our $0.29 estimate. Our estimate is after a $0.29 loss from Rossignol. The $1.59 GAAP loss is after a $240M noncash impairment charge. Income from continuing operations rose 19% on a 15% sales lift driven by 250-bps gross margin expansion, reflecting strength in higher-margin international business (60% of total). Domestic business is slowing, with ZQK's retail locations reporting negative comps. We see completion of the Rossignol divestiture as the next catalyst for ZQK shares. /M.Driscoll-CFA

S&P REITERATES BUY OPINION ON SHARES OF MOLSON COORS BREWING COMPANY (TAP; 59.26):

TAP and SABMiller PLC receive U.S. DoJ clearance to proceed with the proposed joint venture, combining their respective U.S. and Puerto Rico operations. We see the pooling of breweries, distribution and marketing as a way to gain scale in order to better compete with Anheuser-Busch (BUD; 57.70). With $500 million in cost synergies projected by third full-year of combination, we think the joint venture better positions TAP to combat rising raw material costs, while continuing to grow volumes of core brands ahead of the market. TAP will have 50% voting interest and 42% economic interest. -E. Kwon-CFA


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