Markets & Finance

S&P Picks and Pans: Ambac, Apple, Corning, Whirlpool, Lehman, Staples, Coca-Cola


Analysts' opinions on stocks in the news Wednesday

From Standard & Poor's Equity ResearchS&P UPGRADES OPINION ON SHARES OF AMBAC FINANCIAL GROUP TO HOLD FROM SELL (ABK; 8.77):

We believe ABK's receipt of regulatory approval to fund a new bond insurance unit that could receive a top-tier financial strength rating will likely provide the shares (down 66%, year-to-date) with a catalyst. Our outlook remains tempered by concerns that claims from ABK's structured finance unit continue to impact results in coming periods and that ABK's business model and reputation remain, in our view, diminished. Our $9 target price, raised $4.50 today, assumes ABK shares trade at a discount to historical price/book levels, but in line with most peers. -C. Seifert

S&P REITERATES SELL OPINION ON SHARES OF APPLE INC (AAPL; 164.69):

AAPL is scheduling a media event on Sept. 9 called "Let's Rock". Considering that AAPL has used such events to announce news of product line releases, updates, or price cuts, we are anticipating the possible release of new iPods and price reductions for its older versions. The event could also mark the first public appearance of CEO Steve Jobs since the Apple Worldwide Developer's Conference last June. Given the maturity of AAPL's important iPod line, we continue to see mounting pricing pressure as consumer electronic sales decelerate during softer macroeconomic times. -T. Smith-CFA, C. Montevirgen

S&P LOWERS RECOMMENDATION ON CORNING SHARES TO BUY FROM STRONG BUY (GLW; 18.01):

GLW says an inventory buildup of LCD glass by its Taiwanese customers will cause its third quarter sales and EPS to be lower than prior guidance, which would take it below our projections. We are lowering our 2008 and 2009 EPS estimates by $0.08 and $0.06, to $1.88 and $1.95, as slower growth in its high-margin LCD segment outweighs improvements in telecom and in its separate LCD joint venture. We believe the inventory will take more time to clear than originally expected, pushing growth off until 2009. We cut our target price by $4 to $24 to reflect a p-e of 12, in line with peers. -T.Rosenbluth

S&P DOWNGRADES OPINION ON WHIRLPOOL SHARES TO HOLD FROM BUY (WHR; 84.36):

In our view, weakening consumer demand for home appliances in Europe and the prolonged U.S. housing downturn are strong headwinds against WHR growing top line and widening margins. We see year-over-year sales declines for the rest of 2008 and expect sales may not rebound until late 2009. We are lowering our 2008 EPS estimate to $6.70 from $7.00, below the Street's mean projection of $6.93, and 2009's to $7.50 from $8.30. With the shares near our view of appropriate value, which is our $88 target price, which assumes a near-peer p-e of 13.1, we would not add to existing positions. -K. Leon-CPA

S&P MAINTAINS HOLD OPINION ON SHARES OF LEHMAN BROTHERS (LEH; 16.13):

In an unconfirmed story, the Associated Press, citing Korean news sources, said that Korea Development Bank, as part of a consortium, has made an offer to acquire 25% of LEH for up to $5.3 billion. The report also noted competitors for the deal, including U.S. hedge funds and Chinese and British banks. Separately, an unconfirmed report in the Times of London suggested that Mitsubishi UFJ (MTU; 7.50) may bid on all or part of LEH following August-quarter results. We continue to expect some type of capital raise and consider an outright sale of the company to outsiders as unlikely. -M. Albrecht

S&P REITERATES BUY RECOMMENDATION ON SHARES OF STAPLES (SPLS; 25.24):

July-quarter EPS of $0.21, vs. $0.25, is in line with our recently reduced estimate. Excluding the impact of SPLS's Corporate Express acquisition, sales grew 3% despite a 7% decline in North American Retail. We think the environment for both consumer and business spending will remain challenging over the near term. However, we expect significant synergies from the Corporate Express transaction to drive meaningful EPS growth despite weak macro conditions. We are maintaining our fiscal year 2009 (January) and fiscal year 2010 EPS foercasts of $1.42 and $1.63, and keeping our 12-month DCF-based target price at $30. -M. Souers

S&P MAINTAINS STRONG BUY OPINION ON SHARES OF COCA-COLA COMPANY (KO; 51.37):

KO intends to purchase China Huiyuan Juice Group for $2.4 billion, which would double its share in the Chinese juice market. We see this as a full price, but we believe the proposed transaction would improve KO's position in non-carbonated beverages, and broaden its international reach. The company expects the buyout would be $0.03-$0.04 dilutive in first full year after completion and accretive in year three. To fund the purchase, KO has reduced its stock repurchase expectations to $1 billion from $1.75-$2 billion. We keep our target price at $62. -E. Kwon-CFA


The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW

Sponsored Financial Commentaries

Sponsored Links

Buy a link now!

 
blog comments powered by Disqus