10/29/2008 - Upgrade & Downgrade (Update 2)

UPGRADE :

S&P maintains strong buy opinion on shares of Procter & Gamble (PG)

September-quarter EPS of $1.03, vs. $0.92, is $0.03 above our estimate. Upside came from better-than-expected Beauty segment results and corporate expenses. Sales rose 9%, after positive 4% forex. With the recent sharp rise in U.S. dollar, we now expect the forex impact to be negative in December-quarter and fiscal year 2009 (June). We reduce our fiscal year 2009 EPS estimate by $0.15 to $3.73, to reflect $0.12 incremental restructuring charges and the rest from forex changes. We exclude an estimated $0.50 per-share gain from the Folgers deal. We are trimming our p-e- and DCF-based 12-month target price by $2 to $78. -L. Braverman-CFA

S&P reiterates strong buy opinion on shares of Kraft Food (KFT)

Before some special items, third quarter EPS from continuing operations of $0.45, vs. $0.40, exceeds our estimate by $0.01. Amid concerns about economic weakness, we expect the shares to benefit from prospect that sales of KFT products will benefit from consumers eating more at home. While stronger U.S. dollar would likely be negative for translation of overseas sales and profits, commodity cost pressure may ease. We trim our 2008 EPS estimate to $1.90 from $1.91, and 2009's to $2.03 from $2.06, and keep our 12-month target price at $37. Indicated dividend yield is about 4.0%. -T. Graves-CFA

S&P maintains buy opinion on shares of Boeing(BA)

BA and the International Machinists Union reach tentative agreement on a 4-year contract covering 27,000 BA employees, who must approve the offer. The strike, which began in early September, cost BA an estimated $100 million in deferred revenue per day. Although we expect it will take BA some time to ramp up production, we are raising our 2008 EPS estimate by $0.10 to $4.72. We are also lifting 2009's by $0.20 to $5.85, as we had projected the strike would last significantly longer. We note that a settlement is critical to BA shipping on its large order book of 787s, 737s, and 777s. -R. Tortoriello

S&P raises opinion on Fidelity National Information(FIS) Shares to buy from hold, on valuation

Cash EPS of $0.42, vs. $0.31, is $0.01 above our estimate. Sales rose 25% to $894 million, helped by acquisition, international growth and forex, beating our $856 million forecast. Organic sales growth of 9% was above our 6% outlook. Despite the environment, FIS believes that pipelines for core processing remain solid. We think FIS is taking prudent measures to bolster cash flow and manage expenses. To adjust for sale of Certegy Australia, we trim our 2008 cash EPS projection $0.03 to $1.50 and 2009 $0.07 to $1.65. We cut our target price by $6 to $18, 11X our 2009 estimate, a bit below peers at 11.5 times. -Z. Bokhari

S&P reiterates strong buy recommendation on shares of United States Steel(X)

X posts third quarter EPS of $7.79, vs. $2.27, on a 68% sales increase, exceeding our $5.75 estimate on higher-than-expected sales. To reflect the positive EPS surprise, we are raising our 2008 EPS forecast to $17.61 from $16.19. However, we are cutting our 2009 EPS estimate to $7.38 from $8.92, based on our assumptions of a drop in demand for oil country tubular goods and further weakness in domestic and European flat roll operations. Based on our revised 2009 estimate and our expectation for X to carry a low p-e on falling EPS, we are cutting our 12-month target price to $46 from $55. -L. Larkin

S&P raises opinion on shares of Plum Creek Timber(PCL) to buy from hold

PCL reports third quarter EPS of $0.40, vs. $0.34, ahead of our $0.38 estimate. Although sawlog volume has fallen due to the weak housing market, demand for rural land is stable. PCL recently reduced debt through land sales, and has more strategic sales planned. We are increasing our 2008 EPS estimate to $1.50 from $1.20, and our 2009 forecast to $1.70 from $1.40 based on higher expected land sales. Although we are reducing our 12-month target price to $40 from $50, due to a higher discount rate in our dividend discount model, we believe PCL shares are undervalued. -S. Benway-CFA

HOLD/NEUTRAL :

S&P maintains hold opinion on Corning Shares (GLW)

Third quarter EPS of $0.46, vs. $0.38, is $0.01 ahead of our estimate on wider-than-expected operating margin. Display sales were weaker than we expected and telecom was slightly stronger. But due to slowing demand for LCD TVs in September and October and reduced orders from display customers, GLW sees fourth quarter sales and gross margin well below our forecast and it plans to reduce manufacturing and R&D costs to better realign its business. We look to the morning call for details on how protracted the downturn will be to GLW's typically high-margin display segment. -T. Rosenbluth

S&P maintains hold opinion on class A shares of Comcast Corp. (CMCSA)

Before $0.02 net tax benefit, third quarter EPS of $0.24, on 6% less shares, vs. $0.18 is $0.01 above our estimate, $0.02 above Street's. Despite 147,000 basic subscriber losses, 1.1 million revenue-generating unit net adds were encouraging, as economy and calendar shift weighed on ads at cable and programming units. CMCSA affirmed 8%-10% 2008 total revenue and EBITDA growth and, with lower capex, now sees prior 20% free cash growth forecast as conservative. As we expected, CMCSA pulls its prior target for $7 billion stock buyback completion ($4.1 billion unused), citing capital market turmoil. -T. Amobi - CPA, CFA

S&P keeps hold recommendation on shares of Deutsche Bank(DB)

Ahead of third quarter results, we are lowering our 2008 EPS estimate to $3.95 from $9.38 and 2009's to $9.76 from $15.96 to reflect forex changes, an expected decline in trading and commission income, and the impact of higher loan-loss provisions and the effects of financial turmoil on future earnings. We expect a further reduction in DB's risky assets, which stood at €44.6 billion at second quarter end, down nearly 20% from the first quarter. We are cutting our 12-month target price to $45 from $110, which values DB at 0.8 times our 2008 estimate of tangible net asset value, a discount to the peer-group multiple. -K. Cole-CFA

DOWNGRADE :

S&P downgrades opinion on shares of Vistaprint to hold from buy (VPRT)

VPRT posts Sepembert-quarter EPS of $0.18, vs. $0.15, below our $0.26 estimate. While revenues of $114 million were better than we projected, helped by strong orders from new and repeat customers, gross margins narrowed from year-ago quarter. VPRT reduced its fiscal year 2009 (June) guidance on greater economic uncertainty. We continue to be concerned about the weakening global economy and adverse affects of currency shifts on VPRT's results in fiscal year 2009. We are lowering our fiscal year 2009 EPS estimate to $0.98 from $1.20, and cutting our 12-month price target by $11 to $30, on lowered 3-year growth expectations. -P. Wang

Related Posts :

1. The Fed may cut rate to 1%
2. 10/29/2008 Market Recap - The 2nd-best day ever
3. 10/28/2008 - Upgrade & Downgrade

Sources :

Business Week: S&P Picks and Pans: Boeing, Fidelity National Information, US Steel, Deutsche Bank, Plum Creek Timber Analysts' opinions on stocks in the news Tuesday, October 28, 2008, 10:55AM EST

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