Markets & Finance

S&P Picks and Pans: Priceline.com, HP, Whole Foods, Sprint Nextel, CBS


Analysts' opinions on stocks in the news Thursday

From Standard & Poor's Equity ResearchS&P UPGRADES OPINION ON SHARES OF PRICELINE.COM TO BUY FROM HOLD (PCLN; 68.74):

Before certain non-cash items, but after the impact of stock-based compensation, we calculate PCLN's fourth quarter EPS at $1.13, vs. $0.87, well above our $0.93 estimate. Revenues rose 20%, exceeding our forecast, reflecting 31% growth in domestic bookings. Forex negatively affected international gross bookings by over 1,100 basis points. In our view, PCLN has seized on opportunities presented by macroeconomic challenges and executed well. We are raising our 2009 EPS estimate to $5.40 from $5.15. Based on revised DCF analysis, we are increasing our 12-month target price to $90 from $75. -S. Kessler

S&P REITERATES STRONG BUY RECOMMENDATION ON SHARES OF HEWLETT-PACKARD (HPQ; 34.08):

HPQ posts January-quarter non-GAAP EPS of $0.93, vs. $0.86, a penny below our estimate. Revenues rose 1%, or 4% before currency effects, as hardware sales suffered in an industry slowdown, while supplies and services fared better. We foresee a smooth integration of the EDS acquisition, market share gains for many key lines, and operating margin improvements based on efficiencies. We are lowering our operating EPS forecasts to $3.85 from $3.95 for fiscal year 2009 (October) and to $4.25 from $4.30 for fiscal year 2010, but are maintaining our p-e-based 12-month target price of $47. -T. Smith-CFA

S&P REITERATES STRONG SELL OPINION ON SHARES OF WHOLE FOODS MARKET (WFMI; 9.29):

WFMI reports December-quarter EPS of $0.20, vs. $0.28, $0.01 above our estimate. Results were hurt by a comparable-store sales decline of 4.0%, slightly better than the 5% decline we expected, and decreased sales leverage despite acquisition synergies. We expect margin pressures to continue with comps declining 4.5% through the first four weeks of March quarter. We are reducing our fiscal year 2009 (September) operating EPS estimate by $0.04 to $0.75, in line with the company's $0.71-$0.76 guidance range. As a result, we are keeping our 12-month target price of $4, based on our updated comparative analysis. -J. Agnese

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF SPRINT NEXTEL (S; 3.25):

Sprint reports fourth quarter $0.01 operating loss before one-time items, vs. year-ago $0.23 EPS, $0.02 better than our estimate. Wireless revenue was roughly in line, despite a 1.1 million postpaid subscriber loss, slightly worse than we expected. Sprint retired $1 billion in debt in the quarter and we believe its leverage position will continue to improve. We think Sprint is making positive strides in stabilizing margins, but the battle to maintain and add subscribers continues. We keep our 2009 loss per share estimate of $0.12, and our 12-month target price of $4 based on enterprise value/EBITDA analysis. -J. Moorman, CFA

S&P MAINTAINS SELL OPINION ON CL. B SHARES OF CBS CORPORATION (CBS; 5.13):

Before $0.01 one-time gain, fourth quarter EPS from continuing operations of $0.19, vs. $0.40, misses S&P's and Street's estimates by $0.07. With adjusted EBITDA down 30% (despite CNET acquisition benefit), we see worst-ever quarterly results, marked by deep deterioration across core TV, radio and outdoor units. With cash at historical-low $420 million, and $4.4 billion of debt maturities looming in 2010, CBS cuts quarterly dividend by 81.5%; an expected move, but of surprising magnitude. Yet more aggressive cost cuts did not materialize. We keep our p-e-to-growth-based $5 target price on new 3.9% yield. -T. Amobi - CPA, CFA


Steve Ballmer, Power Forward
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