Markets & Finance

S&P Picks and Pans: Apple, Morgan Stanley, Honda, GE, Adobe, Fifth Third Bancorp, Satyam


Analysts' opinions on stocks in the news Wednesday

From Standard & Poor's Equity ResearchS&P REITERATES STRONG BUY OPINION ON SHARES OF APPLE INC. (AAPL; 89.94):

AAPL announces that it will no longer participate at the MacWorld Conference & Expo after 2009, and that CEO Steve Jobs will not deliver the keynote speech at the show next month. We believe that AAPL's decision to scale back on trade show appearances is understandable, given its extensive customer reach and brand awareness. But we think that Job's absence adds to concerns regarding his health and future leadership of the company. Nonetheless, we maintain our strong buy opinion based on our favorable view of AAPL's computer and handheld businesses and attractive valuations. -T. Smith-CFA, C. Montevirgen

S&P KEEPS BUY RECOMMENDATION ON SHARES OF MORGAN STANLEY (MS; 16.21):

November-quarter loss per share from continuing operations of $2.24, vs. loss of $3.61, is wider than our $0.42 loss estimate. Writedowns, trading losses, and asset impairments combined to pressure revenues, and each segment posted losses. Demand for advice has waned, and the asset management unit is seeing outflows. But we are encouraged by sizeable asset sales and an improved capital position. We expect banking to grow in importance. We lower our fiscal year 2009 (November) EPS estimate to $2.67 from $2.92, but keep our $20 target price, about 0.75 times projected tangible book value, in line with peers. -M. Albrecht

S&P LOWERS RECOMMENDATION ON ADRS OF HONDA MOTORS TO SELL FROM HOLD (HMC; 21.33):

We cut our revenue and earnings forecasts for HMC, based on the company's reduced sales outlook for all regions. We are cutting our earnings per ADR estimate for fiscal year 2009 (March) by 59% to $1.03 and we lower our target price by $2 to $20, 19.4 times our estimate, based on peer and historical p-e analysis. Despite near-term quarterly loss projections and a reduced dividend, we view HMC's balance sheet is healthy and see the company well positioned for the eventual recovery in demand. However, we see near-term risks including a rising yen and weaker-than-expected production. -E. Levy-CFA

S&P MAINTAINS HOLD OPINION ON SHARES OF GENERAL ELECTRIC (GE; 17.51):

In an investor meeting, GE says it sees 0%-5% profit growth in its industrial businesses in 2009, slightly lower than our estimate. We view a $170 billion backlog as supporting 2009 earnings, but see GE as directly linked to the global economy. We are lowering our 2009 EPS estimate by $0.14 to $1.50. We believe prospects for GE's technology and energy infrastructure businesses are strong, evinced by yesterday's $3 billion gas turbine order from Iraq. However, we see continued risk to financial business as the credit cycle unfolds. We see $1.24 dividend as likely to be maintained in 2009. -R. Tortoriello

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF ADOBE SYSTEMS (ADBE; 23.20):

ADBE posts November-quarter operating EPS we calculate at $0.56, vs. $0.45, $0.02 above our estimate, on wider non-GAAP operating margin than we expected. Sales rose 0.4% to $915 million, $1 million above our forecast. The weak global economy hurt product sales, particularly in North America and Europe. Creative solution segment sales were 11% lower, reflecting soft demand for Creative Solution 4. We expect fiscal year 2009 (November) sales to fall 4% to $3.4 billion, but see operating margins benefiting from a workforce cut. We lift our fiscal year 2009 EPS estimate $0.10 to $1.70 and our target price by $2 to $27, 16 times that estimate. -Z. Bokhari

S&P REDUCES RECOMMENDATION ON SHARES OF FIFTH THIRD BANCORP TO SELL FROM HOLD (FITB; 7.57):

FITB announces that fourth quarter dividend will be $0.01, cut from $0.15 paid in the third quarter as the bank conserves capital in what it characterizes as a very difficult environment. Shares are trading at 0.75 times our tangible book value per share estimate of $10.10, below FITB's peer group, but above other banks with similar levels of nonperforming loans (3.04% at 9/30). We think FITB should trade at a lower ratio of price to tangible book value at 0.70 times, which equates to a $7 target price, reduced by $5 today, to a below-peers 7.5 times our 2010 EPS estimate of $0.93. -E. Oja

S&P LOWERS OPINION ON ADSS OF SATYAM COMPUTER SERVICES TO SELL FROM HOLD (SAY; 7.51):

SAY has called off the purchase of Maytas Properties, for $1.3 billion and a 51% stake in Maytas Infra, citing "the market reaction to the decision." According to an unconfirmed WSJ report, the companies are partly owned by SAY's founders. Now that the deal is off, we are raising our target price by $1 to $7. However, we have serious corporate governance concerns, given a management team that announces $1.6 billion in deals (about 38% of SAY's market cap before the announcement) and then cancels them less than 10 hours afterwards "in deference to the views expressed by many investors." -D. Cathers


Tim Cook's Reboot
LIMITED-TIME OFFER SUBSCRIBE NOW

Sponsored Financial Commentaries

Sponsored Links

Buy a link now!

 
blog comments powered by Disqus