Markets & Finance

S&P Picks and Pans: FedEx, Nucor, Texas Instruments, Con-Way, New York Times, Disney


Analysts' opinions on stocks in the news Tuesday

From Standard & Poor's Equity ResearchS&P REITERATES BUY OPINION ON SHARES OF FEDEX CORP. (FDX; 65.62):

Shares are off about 12% this morning after FDX says it expects November-quarter EPS of $1.58, vs. $1.54, above our $1.44 estimate. However, for fiscal year 2009 (May), FDX sees EPS of $3.50-$4.75, below prior guidance of $4.75-$5.25 and well below our $5.50 estimate, which we are cutting to $4.25. November-quarter results were aided by lower fuel costs, but the rest of fiscal year 2009 is being impacted by a sharp drop in demand. We are cutting our 12-month target price to $80 from $105, valuing the shares at 18.8 times our new fiscal year 2009 EPS estimate, towards the low end of FDX's 5-year historical p-e range. -J. Corridore

S&P LOWERS RECOMMENDATION ON SHARES OF NUCOR TO SELL FROM BUY (NUE; 41.96):

Our opinion change is based on valuation and a more pessimistic EPS outlook. Shares of NUE are higher this morning despite the company's announcement that fourth quarter would be only marginally above the breakeven level due to much lower demand and a sharply reduced operating rate. We are cutting our 2008 EPS estimate to $5.66 from $6.78 and trimming 2009's to $3.96 from $5.07 to reflect greater-than-expected deterioration in demand. Based on our revised 2009 estimate, we are lowering our 12-month target price to $34 from $39. Trading above our target price, we would sell the stock. -L. Larkin

S&P REITERATES HOLD OPINION ON SHARES OF TEXAS INSTRUMENTS (TXN; 14.82):

TXN reduces its fourth quarter outlook to sales of $2.30-$2.50 billion and EPS of $0.10-$0.16 from its previous view of $2.83-$3.07 billion in sales and $0.30-$0.36 EPS, well below our model. TXN cites broad demand weakness, and is cutting manufacturing to meet softer orders and to keep inventory levels at bay. We are reducing our fourth quarter EPS estimate by $0.25 to $0.07, and 2009's by $0.82 to $0.49. We are also lowering our 12-month target price by $5 to $15, on our view of declining annual earnings. We note our expectation that the planned sales of certain businesses will help long term profitability. -C. Montevirgen

S&P REITERATES HOLD OPINION ON SHARES OF CON-WAY INC. (CNW; 25.77):

CNW sees 2008 EPS of $2.20-$2.35, lower than prior guidance of $2.60-$2.80. CNW says November volumes declined 9.2%, following a 3.8% decline in October, against what we viewed as relatively easy comparisons. The company announced workforce reductions and cost-cutting programs and it will write down its acquistion of a Chinese trucking company by $30-$35 million. We are cutting our 2008 and 2009 EPS estimates to $2.33 and $2.45, from $2.75 and $3.10. We are also cutting our 12-month target price to $27 from $38, 11 times our 2009 EPS estimate, towards the low end of CNW's 5-year historical p-e range. -J. Corridore

S&P MAINTAINS SELL RECOMMENDATION ON SHARES OF NEW YORK TIMES (NYT; 7.77):

NYT reports updated guidance on some key 2008 and 2009 metrics. As a result, we are lowering our forecasts for depreciation and amortization and income from joint ventures, and raising our forecast for interest expense. In total, we are reducing our 2008 EPS estimate by $0.01 to $0.53 and 2009's by $0.03 to $0.55. NYT also said it has "no intention or need of fully replacing the $400 million credit facility expiring next year" and is seeking to do a sale-leaseback of a portion of its headquarters for up to $225 million. We are maintaining our 12-month target price of $4. -L. Braverman, CFA

S&P MAINTAINS HOLD OPINION ON SHARES OF WALT DISNEY COMPANY (DIS; 24.56):

As shares gained back some lost ground in past month after slowdown at domestic parks and TV ads weighed on September-quarter, we raise our blended sum-of-the-parts enterprise value/EBITDA target price by $3 to $28. Shares have 1.4% dividend yield. Newer data points should assess promotional countermeasures at parks, but we are mindful of DIS's sobering near-term outlook. Also, we note slowed momentum at the film studio and we see a tough holiday season for Disney stores. With share buybacks effectively halted, we lower our fiscal year 2009 (September) EPS estimate by $0.32 to $2.17 and set fiscal year 2010's at $2.33. -T. Amobi - CPA, CFA


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