Markets & Finance

S&P Picks and Pans: Goldman Sachs, Best Buy, Beckman Coulter, Altria, AT&T


Analysts' opinions on stocks in the news Tuesday

From Standard & Poor's Equity ResearchS&P KEEPS HOLD RECOMMENDATION ON SHARES OF GOLDMAN SACHS (GS; 66.46):

GS posts November-quarter loss of $4.97, vs. EPS of $7.01, wider than our $3.25 loss estimate. Sizeable losses from principal investments and mortgage holdings, less demand for GS's advice businesses and poor trading results resulted in a negative net revenue total. A negative compensation accrual and tax benefit helped the bottom line. We are lowering our fiscal year 2009 (November) EPS projection to $7.65 from $10.49, but keeping our 12-month target price at $75, a discount to projected tangible book value. We believe conditions remain difficult, but we expect a profit in the year ahead. -M. Albrecht

S&P REITERATES BUY RECOMMENDATION ON SHARES OF BEST BUY (BBY; 27.12):

Before a charge, November-quarter EPS of $0.35, vs. $0.53, is $0.07 higher than our estimate. Our near-term outlook remains cautious, given a weak macroenvironment and liquidation sales at peer Circuit City (CCTYQ; $0.18, not ranked), which will likely pressure margins. But we favor BBY's decision to rein in store openings next year and its rigorous focus on SG&A line. We are raising our fiscal year 2009 (February) operating EPS estimate to $2.73 from $2.62 and fiscal year 2010's to $2.38 from $2.19, and raising our DCF-based target price by $2 to $34. We think BBY is attractive, trading at a p-e-to-growth ratio below 0.9. -M. Souers

S&P REITERATES HOLD OPINION ON SHARES OF BECKMAN COULTER (BEC; 40.61):

BEC reaffirms 2008 earnings outlook; issues preliminary 2009 guidance of 5% higher revenue on constant currency basis and EPS growth of 10%. To control expenses, BEC implements a zero overhead growth policy for 2009. We note that nearly 80% of BEC's revenues are consumable and recurring, which we view as less cyclical than cash instrument sales - which we expect to remain under pressure. We keep our 2008 EPS estimate at $3.57 and trim our 2009 forecast by $0.05 to $3.95. As a result of lower peer multiples, we reduce our p-e-to-growth-based 12-month target price by $15 to $45. -J. Loo-CFA, SSilver

S&P MAINTAINS STRONG BUY RECOMMENDATION ON SHARES OF ALTRIA GROUP (MO; 15.21):

Yesterday, the Supreme Court ruled federal labeling laws do not protect companies marketing "light" cigarettes from being sued in state lawsuits for false advertising. We are surprised by the ruling, as a recent trend favored federal over state regulation. While we see this as a setback to the industry and we see several previously delayed state suits now proceeding, we believe the financial implications are limited, since money is not sought for physical harm but for "overpayment" by consumers. In addition, fraud claims are generally not well suited for class action status. -E. Kwon-CFA

S&P MAINTAINS STRONG BUY OPINION ON AT&T SHARES (T; 27.13):

We are updating our forecasts to reflect slightly slower revenue growth amid macroeconomic pressure on T's enterprise segment, unusually high pension accounting expenses due to expected weak performance for its investments, and workforce-reduction benefits. We lower our 2009 EPS estimate by $0.23 to $2.84, which, in our view, will mask the strong prospects in its wireless and broadband segments that will lead to 3% revenue growth. We are trimming our target price by $1 to $33, but contend T's strong free cash flow and 6% dividend yield warrant a premium-to-peers p-e of 11.6. -T. Rosenbluth


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