S&P DOWNGRADES RECOMMENDATION ON SHARES OF WELLPOINT TO SELL FROM BUY (WLP; 65.92):
WellPoint cuts its 2008 operating EPS forecast to $5.70-$5.95 from $6.41, citing higher medical cost trends, a shortfall in Medicare Advantage growth, individual/small group attrition, and pending Medi-Cal premium cut. We view some problems as company-specific, with WLP underestimating cost trends. But we also see industrywide issues from intensified competition, and from enrollment hurt by the weak economy, situations we do not see improving for a while. We cut our 2008 estimate by $0.80 to $5.60, 2009's by $1.05 to $6.25, our forward p-e to 9 from 14, and target price by 40 to 50. /P.Seligman
S&P DOWNGRADES OPINION ON AETNA SHARES TO HOLD FROM STRONG BUY (AET; 41.62):
Aetna reaffirms its guidance of 2008 operating EPS of $4.00, assuming 800,000-850,000 more medical members and a commercial medical benefit ratio of under 80%. While Aetna so far does not appear to us to be facing unexpectedly higher medical cost trends and member attrition as does WellPoint, we see risk of slower revenue and EPS growth ahead, given price competition and the weak economy, issues we also see impacting its peers. On this risk and peerwide valuation compression, we cut our target p-e to 11.5 from 17, and our 12-month target price by 22 to 46. /P.Seligman
S&P REITERATES HOLD OPINION ON SHARES OF TEXAS INSTRUMENTS (TXN; 29.65):
In an update for the first quarter, Texas Instruments provides sales and earnings guidance that is below our expectation. It now projects sales between $3.21-$3.35 billion, versus previous guidance of $3.27-$3.55 billion, and below our $3.4 billion estimate. We see the shortfall coming from its semiconductor business, specifically wireless chip sales. TXN now expects EPS between $0.41-$0.45, compared to $0.43-$0.49. We reduce our first quarter EPS estimate $0.01 to $0.43. We remain cautious given economic headwinds and expected market share loss ahead. We will provide an update after the company reports quarterly results. /C.Montevirgen
S&P MAINTAINS SELL OPINION ON CLASS A SHARES OF COMCAST (CMCSA; 19.45):
An unconfirmed NY Times report alludes to talks among the cable consortium of Comcast, Time Warner Cable (TWC; 26.00), Cablevision (CVC; 22.80), Charter (CHTR; .90), and privately held Cox Communications and Bright House toward a venture offering customized and interactive ads to national buyers, with initial cable investment of $150 million, aimed at fending off Google (GOOG; 416.70). With small investment, we think local operators could reap long-term upside on relatively untapped national ad market. But the venture could could face significant near-term hurdles to luring major ad buyers. /T.Amobi-CPA,CFA
S&P MAINTAINS HOLD OPINION ON SHARES OF FOOT LOCKER (FL; 11.12):
January-quarter operating EPS of $0.23 vs. $0.70 misses our estimate by $0.12, as Foot Locker took heavy clearance markdowns to improve its inventory position while exercising tight control over expenses. While we think assortments need further tweaking, we look for the company to arrest its negative same-store sales trend and to significantly reduce its markdown levels in fiscal year 2009 (January) through conservative sales and inventory planning, and further closure of underperforming stores. We reiterate our fiscal year 2009 operating EPS estimate of $0.85 and our 12-month target price of 12. /J.Asaeda