Markets & Finance

S&P Picks and Pans: Applied Materials, Mattel, GM, ADC Telecom, Rockwell, Corn Products


Analysts' opinions on stocks in the news Monday

From Standard & Poor's Equity ResearchS&P REITERATES BUY RECOMMENDATION ON SHARES OF APPLIED MATERIALS (AMAT; 9.38):

AMAT provides January-quarter sales update of $1.33 billion, at the low end of prior guidance of down 25%-35% from October-quarter. It sees a net loss of $0.09-$0.11, which includes $0.09 in one-time charges, vs. previous outlook for EPS of breakeven to $0.04. We believe the sales decline is near those recently announced by peers. We think semiconductor and flat panel capital spending will be down as much as 50% in calendar year 2009. We reduce our fiscal year 2009 (October) EPS estimate by $0.56 to a $0.28 loss and initiate fiscal year 2010 at $0.17 EPS. However, we keep our 12-month target price at $13, on a price/sales above peers. -A. Zino-CFA

S&P MAINTAINS HOLD RECOMMENDATIONS ON SHARES OF MATTEL (MAT; 11.71):

Fourth quarter sales for MAT fell 11%, worse than the roughly flat sales we expected, with significant domestic and international shortfalls. And EPS of $0.49, vs. $0.89, is well short of our $0.72 estimate. Aside from American Girl, all other segment sales were down double-digit percentages. Although we think MAT has an attractive suite of brands that should drive long-term profit growth, we see continued near-term difficulties, especially international volumes and forex. We cut our 2009 EPS estimate to $1.15 from $1.46 and our target price to $15 from $17 on updated p-e and EBITDA analysis. -E. Kolb

S&P REITERATES SELL OPINION ON SHARES OF GENERAL MOTORS (GM; 2.95):

An unconfirmed report in the Detroit News indicates that under current tax laws, GM could be on the hook for a multi-billion dollar tax payment in connection with its restructuring plan. Since this would be counter-productive to the intent of the government aid program, we expect this matter to be remedied. Separately, preliminary reports appear to indicate a dramatic weakening of global automotive demand continues to damage profitability and financial strength of nearly all major automakers, and we are cutting our target price by $0.50 to $1.50 on price/sales analysis. -E. Levy-CFA

S&P RAISES RECOMMENDATION ON SHARES OF ADC TELECOM TO HOLD FROM SELL (ADCT; 3.66):

The shares are down 30% today after ADCT pre-announces January-quarter sales at $240-$250 million, below previous $255-$290 guidance. The weakness stems from reduced telecom spending amid a softening economy. In an effort to align its business model with the lower customer demand, ADCT plans further restructuring, including additional workforce reduction. We now forecast a January-quarter loss of $0.12 per share cut from prior breakeven estimate. Even so, we think the share price, below our 12-month target price of $4, based on roughly 0.9 times cash, now adequately reflects the challenging environment. -A. Bensinger

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF ROCKWELL AUTOMATION (ROK; 21.76):

December-quarter EPS of $0.81, vs. $1.04, is $0.07 ahead of our estimate on slightly better margins, though mostly reflecting a much lower tax rate. For full fiscal year 2009 (September), we are cutting our revenue forecast to reflect global economic weakness and ROK's projection, and with our operating margin assumptions, this leads to EPS of $1.80, cut by $1.17. We expect some improvement in fiscal year 2010 results on sales growth and margin improvement, but even so, our estimate of $2.02 has been reduced by $2.01. On the lowered estimates, we cut our relative peer and DCF-based target price by $8 to $24. -M. Christy, CFA

S&P REITERATES HOLD RECOMMENDATION ON SHARES OF CORN PRODUCTS INTERNATIONAL (CPO; 21.12):

CPO reports fourth quarter operating EPS of $0.70, vs. $0.61, in line with our estimate. The company sees 2009 EPS in the range of $2.10-$2.60 reflecting significantly higher net corn costs and unfavorable forex. We are reducing our 2009 EPS estimate by $1.20 to $2.35 and see 2010 EPS of $2.70, based on our belief that adverse forex impact will not be offset through higher pricing and volumes until 2010 and lower corn co-product values are likely to persist. As a result, we are reducing our 12-month target price by $6 to $22, based on our comparative and forward 12-month p-e analyses. -J. Agnese


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