Markets & Finance

S&P Picks and Pans: Intuit, Citigroup, Wellcare, VCA Antech, New York Times


Analysts' opinions on stocks in the news Friday

From Standard & Poor's Equity ResearchS&P MAINTAINS HOLD RECOMMENDATION ON INTUIT INC. SHARES (INTU; 21.27):

We calculate January-quarter operating EPS of $0.27, vs $0.35, $0.06 above our estimate owing to lower expenses. Sales fell 5% and were $12 million below our view due to weak QuickBooks, Quicken and real estate solution sales. We expect weak growth in paid QuickBooks users as small businesses are impacted by the economy; we still project $1 billion in consumer tax sales. We cut our fiscal year 2009 (July) sales view to $3.23 billion from $3.27 billion. We trim our fiscal year 2009 EPS estimate $0.02 to $1.62 on higher projected stock-based compensation expense and set $1.75 for fiscal year 10. We keep our $24 target price, 14 times our fiscal year 2010 estimate. -Z. Bokhari

S&P MAINTAINS HOLD OPINION ON SHARES OF CITIGROUP (C; 2.51):

Unconfirmed Wall Street Journal report says that Citigroup plans to sell its stake in Redecard, which could raise $1 billion. We would view this as a positive, albeit small, step in Citi's goal to reduce its asset base and increase its tangible equity ratio. Shares have come under more pressure recently due to fears of nationalization. Barring a major loss of deposits, we think nationalization is a solution of last resort. Still, we are lowering our target price to $3 from $5, a below-historical roughly 0.5 times tangible book value to account for possible further markdowns on its securities. -S. Plesser

S&P DOWNGRADES OPINION ON WELLCARE HEALTH PLANS SHARES TO STRONG SELL FROM HOLD (WCG; 11.02):

Medicare orders WCG to halt marketing/enrollment in its Medicare plans by Mar. 7, given WCG's numerous deficiencies in serving its enrollees and 2,500 complaints it received in January. WCG says it is working with the agency, but we do not see issues resolved soon. Current members in WCG's Medicare and Medicaid plans are unaffected, but we think news will make it tough for WCG to retain/attract Medicare members once issues are resolved. We cut our 2009 EPS estimate $0.50 to $2.00 on higher legal and G&A costs. By widening its p-e discount to peers, we cut our target price by $7 to $8. -P. Seligman

S&P REITERATES BUY RECOMMENDATION ON SHARES OF VCA ANTECH (WOOF; 22.52):

Fourth quarter EPS of $0.30, vs. $0.29, is $0.04 above our estimate. While same-store animal hospital sales were flat, in line with our view, cost controls led to stronger-than-expected gross margins. Although macro headwinds will likely result in consumers scaling back on high-margin diagnostic tests in 2009, we expect owners otherwise to care for their pets with undiminished fervor. We raise our 2009 EPS estimate to $1.58 from $1.49, and set 2010's at $1.76. We are also increasing our DCF-based target price by $2 to $27. We think WOOF shares are attractive at a p-e-to-growth rate below 1.0. -M. Souers

S&P MAINTAINS SELL RECOMMENDATION ON SHARES OF NEW YORK TIMES (NYT; 3.75):

NYT suspends its dividend. This follows its November 2008 cut in its quarterly payout from $0.23 per share to $0.06. Amid a worsening advertising environment, we see NYT looking for more financial flexibility. In recent months, it has also lowered capital spending, cut operating costs, completed a private financing transaction for $250 million (at a high cost, in our view), and continues to explore the possible sale of other assets, including part of its headquarters. We trim our 2009 EPS estimate by $0.05 to $0.39 and lower our 12-month target price by $1 to $3. -L. Braverman, CFA


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