Markets & Finance

S&P Picks and Pans: FedEx, Take-Two, Alliant Energy, Avalonbay, MEMC Electronic


Analysts' opinions on stocks in the news Thursday

From Standard & Poor's Equity ResearchS&P REITERATES BUY OPINION ON SHARES OF FEDEX CORP. (FDX; 63.97):

November-quarter EPS of $1.58, vs. $1.54, is in line with last week's guidance. Results benefitted from lower fuel costs and a lag in timing of FDX's fuel surcharge and the drop in fuel costs. FDX is taking aggressive action to cut costs, including eliminating raises and bonuses, salary cuts, suspending 401k matching, and capex spending cuts. We think FDX remains well positioned for growth when the economy recovers. We are keeping our fiscal year 2009 and fiscal year 2010 EPS estimates at $4.25 and $4.90, and our target price at $80, 16.3 times our fiscal year 2010 EPS estimate, the low end of FDX's 5-year historical p-e range. -J. Corridore

S&P REITERATES SELL RECOMMENDATION ON SHARES OF TAKE-TWO INTERACTIVE SOFTWARE (TTWO; 12.07):

TTWO posts October-quarter loss of $0.20, vs. loss of $0.10, worse than our EPS estimate of $0.04. Revenue rose 11% to $323M, $2 million below our forecast. TTWO is seeing lower-than-expected overall holiday sales amid weak consumer spending. TTWO signed a long-term contract with Rockstar Games, developers of the Grand Theft Auto series, but we think terms may have been too generous given that TTWO needs to cut costs and has few major titles expected to be released in fiscal year 2009 (October). We are lowering our fiscal year 2009 estimate to a loss of $1.72 from EPS of $0.63, and our 12-month target price by $3 to $8. -J. Yin

S&P REDUCES RECOMMENDATION ON SHARES OF ALLIANT ENERGY TO SELL FROM BUY (LNT; 28.66):

LNT provides EPS guidance for 2009 that is below our initial estimate. The utility cites declining retail sales, regulatory lag in recovering cost increases at subsidiary Interstate Power and Light, along with a rate case settlement on weakness in regulated operations. As a result, we are lowering our 2009 EPS estimate by $0.55 to $2.35. In addition, we see moderately higher macroeconomic pressure in LNT's upper Midwest US service territory relative to peers. Despite support from LNT's dividend, we reduce our 12-month target price by $11 to $27, based on 11.5 times our 2009 estimate. -C. Muir, T. Rosenbluth

S&P REDUCES RECOMMENDATION ON SHARES OF AVALONBAY COMMUNITIES TO SELL FROM HOLD (AVB; 63.78):

In view of a difficult economy, AVB curtails planned development by $1.5 billion, to $4.0 billion. Projects under construction will be completed. However, 16 other projects have been abandoned and will result in one-time charges of $65-$75 million, about $0.90 per share. We keep our 2008 and 2009 estimates of recurring per share funds from operations at $5.05 and $5.15. We believe AVB's long-term growth prospects, however, are now less visible. Also, we are concerned by exposure to Northeast markets, vulnerable to layoffs in the financial sector. Our target price remains $58. -R. Shepard

S&P REITERATES HOLD RECOMMENDATION ON SHARES OF MEMC ELECTRONIC MATERIALS (WFR; 16.66):

WFR pre-announces sales of $400-$425 million, compared with prior restated guidance of $500 million. We believe the lower outlook reflects the significant end-market weakness being witnessed in both the semiconductor and solar markets. We see margins further narrowing in 2009 due to lower semiconductor sales, solar customers seeking to renegotiate long-term contracts, and an ongoing decline in polysilicon spot prices. We are lowering our 2008 operating EPS estimate by $0.15 to $3.22 and 2009's by $0.68 to $2.29. We are keeping our 12-month target price at $16, based on revised relative metrics. -A. Zino-CFA


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