Markets & Finance

S&P Picks and Pans: HP, BofA, Yahoo, Ford, Corning, PetroChina


Analyst opinions on stocks making headlines in Friday's market

From Standard & Poor's Equity ResearchS&P UPGRADES SHARES OF HEWLETT-PACKARD TO

STRONG BUY FROM BUY

HPQ; $45.67

We are adopting a more bullish stance on HPQ following brighter PC industry outlooks in mid-June from market research firms. Gartner raised its 2008 PC unit sales growth forecast to 12.5% from 10.9%, and IDC went to 15.9% from 12.8%. We see buyer demand for laptops driving volume and supporting firmer average selling prices. We are raising our FY 08 (Oct.) EPS estimate for HPQ

to $3.60 from $3.56, and FY 09's to $4.05 from $4.00. We increase our 12-month target price to $61 from $57, applying a target P/E of 16X, a

bit higher, to our 12-month forward EPS estimate of $3.84. /T. Smith, CFA

S&P DOWNGRADES SHARES OF BANK OF AMERICA TO

SELL FROM HOLD

BAC; $27.5**)

BAC plans to complete the acquisition of

Countrywide Financial (CFC) by July 1, assuming CFC shareholders approve the transaction. We take unfavorable note of the

large CFC option-ARM portfolio that BAC will inherit, since we believe this portfolio has yet to be stress tested. Separately, we look for

BAC to significantly add to loss provisions to reflect a weakening U.S. consumer, and also to cut its dividend. We are lowering our '08

EPS estimate by $0.51, to $2.16, and reducing our target price by $9, to $24, 11.1X our that estimate, a slight discount to peers. /S. Plesser

S&P REITERATES HOLD OPINION ON SHARES OF YAHOO INC.

YHOO; $22.73

A number of high-level/important executives have recently left or indicated they will soon leave YHOO, according to reports from the NY Times and WSJ, among others. We have confirmed some of these past/pending departures, many of which followed the abandonment of a possible deal with Microsoft (MSFT) and announcement of a search pact with Google (GOOG) . We think a restructuring is the offing and that morale is likely relatively low. With human capital historically having been one of YHOO's greatest assets, we see these developments as a material negative. /S. Kessler

S&P MAINTAINS HOLD OPINION ON SHARES OF FORD MOTOR

F; $6.32

We are cutting our '08 light vehicles sales forecast to 14.8M units from 15.0M. We expect '09 sales to edge up to a still-weak 14.9M. We believe June automotive sales will continue to be weak with a sharp shift to more fuel-efficient vehicles away from trucks and SUVs. We believe F will be particularly penalized by the shift due to the company's high dependence upon its F-150 pickups. We are widening '08 forecast to a $1.02 loss from a $0.52 loss and see a more modest $0.05 loss in '09. We are cutting our target price by $0.50 to $7.50, based on peer price/sales analysis. /E. Levy, CFA

S&P REITERATES STRONG BUY OPINION ON SHARES OF CORNING

GLW; $25.41

GLW now believes the 2008 global LCD glass market will increase at the upper end of its targeted 25%-30% annual growth forecast, saying it has not yet seen any impact to LCD sales from the current economic downturn. Additionally, the company estimates that inventories are at very reasonable levels, as the supply chain prepares for seasonally robust second half demand. With LCDs the primary growth driver for GLW, today's affirmation of continued strong industry trends gives us increased confidence in our above-industry-average 19% sales growth forecast for '08. /T. Rosenbluth

S&P MAINTAINS BUY RECOMMENDATION ON ADSS OF PETROCHINA CO LTD

PTR; $132.93

The PRC government has raised prices of gasoline, diesel and jet fuel, by about 18%, 20%, and 26%, respectively. We expect short-term ADS price appreciation, but also note that the move lags the rise in oil prices. We believe the government's action reduces PTR's refining losses, and more importantly signals its willingness to move towards market pricing for petroleum products. We lift our earnings per ADS forecast for '08 and '09 to $13.98 and $12.04, or by 15%, and 9%, respectively. We maintain our 12-month target price unchanged of $167. /L. Tan

S&P RAISES RECOMMENDATION ON SHARES OF TRANSOCEAN INC TO STRONG BUY FROM BUY

RIG; $140.01

For its semisubmersible rig GSF Development Driller II, RIG obtains a five-year, $1.06 billion contract in the U.S. Gulf of Mexico from BP plc (BP). Averaging out to approximately $580,000 a day, this is $80,000 above our prior estimate for this rig's prospects upon completion of its current contract, and underscores strong long-term interest in deepwater development. Based on the news, we raise our '08 EPS estimate by $0.03 to $15.09, '09's by $0.12 to $17.16, and on elevated peer multiples, blended with our NAV model, we raise our 12-month target price by $6 to $188. /S. Glickman

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF HUNTINGTON BANCSHARES

HBAN; $5.14

HBAN expects net charge-offs for '08 to be 0.60%-0.65% of average total loans and leases; our expectation was 0.40%, in line with Q1. HBAN also announces issuance of $569 million in convertible preferred to bolster capital levels, and downplays market speculation that a significant deterioration of credit quality is imminent. We are raising our loan-loss provision estimates for '08 and '09 and cutting our EPS estimates to $0.80 for '08 and $0.98 for '09, from $1.45 and $1.35. We are reducing our 12-month target price by $2 to $8, on a peer-equivalent 8.0X our '09 EPS estimate. /E. Oja


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