S&P REITERATES BUY RECOMMENDATION ON SHARES OF HOME DEPOT (HD; 27.59):
Excluding special charge, April-quarter EPS of $0.41, vs. $0.48, is $0.04 above our estimate. The upside was entirely driven by a calendar shift, which also caused same-store sales to decline 6.5% (-9.2% excluding shift). We expect results will be hurt by further housing market deterioration along with rising raw material costs. As a result, we lower our fiscal year 2009 (January) and fiscal year 2010 operating EPS forecasts to $1.75 and $1.91 from $1.82 and $1.99, and trim our DCF-based target price by 1 to 34. However, trading at a 16 p-e in what we see as a trough earnings year, we find HD attractive. -M. Souers
S&P KEEPS HOLD RECOMMENDATION ON SHARES OF LEHMAN BROTHERS (LEH; 42.10):
An unconfirmed report in The Daily Telegraph suggests that Barclays (BCS; 32.14) may consider acquiring a weakened rival, utilizing funds from a capital raise, and that LEH may be a target. While we think LEH may be attractive from an acquirer's standpoint at its current valuation, we believe its shareholders would require a steep premium to the current quote. We do not see a near-term deal as likely, although speculation may prop up these shares. We are keeping our target price at 47, 1.2 times projected book value, a discounted multiple to peers. -M. Albrecht
S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF CITIGROUP (C; 22.67):
Citigroup's Falcon Strategies hedge fund, a fixed income vehicle, has dropped about 75% in value. Many of the fund's investors are retail clients at its Smith Barney unit. The fallout is causing both monetary losses for Citi and the loss of possible future business. Citi is spending some $250 million to help absorb losses; some high-level brokers are also leaving the wealth management firm because of client dismay. We believe this is yet another hurdle for new CEO Vikram Pandit, who is also attempting to improve the balance sheet and unify the complexities of the company. -S. Plesser
S&P LOWERS OPINION ON SHARES OF RYDER SYSTEM TO HOLD FROM BUY, ON VALUATION (R; 74.25):
The shares are up about 58% thus far in 2008, compared with a 3% decline in the S&P 500. But with valuations near historical peaks on both p-e and enterprise-value/EBITDA ratios, we believe the share price has already factored in a turn in the freight markets. We continue to see the lease and supply chain segments providing earnings stability, but think Ryder's commercial unit will continue to see limited improvement in coming months. We maintain our EPS estimates at $4.75 and $5.36 for 2008 and 2009, respectively, and keep our target price at 76 based on DCF and p-e valuation models. -K. Kirkeby, CFA
S&P REITERATES HOLD OPINION ON ADSS OF THE9 LTD. (NCTY; 25.79):
NCTY is surging in pre-market trading, after posting first quarter per-ADS earnings of $0.46, vs. $0.30, $0.16 above our forecast. Revenues rose 63%, more than doubling our projection of 28%, and registering the highest growth since mid-2006, reflecting continuing growth from World of Warcraft (WoW), and a full-quarter contribution from new game Granado Espada. We are raising our per-ADS profit forecasts for 2008 to $1.82 from $1.60 and 2009 to $2.30 from $2.05. Based on revised peer considerations, we are lifting our 12-month target price to 33 from 25. -S. Kessler