S&P KEEPS HOLD RECOMMENDATION ON SHARES OF COVENTRY HEALTH CARE (CVH; 30.80):
CVH says it underestimated Medicare private-fee-for-service claim levels due to lengthy payment cycle times, and hence sees higher Medicare Advantage medical loss ratio run rates. It also raises commercial medical loss ratio guidance on spike in outpatient utilization and inpatient unit costs. We think planned price hikes should help limit further commercial MLR rise. CVH also sees lower commercial membership and workers comp fees than were expected, which we attribute to soft economy. We cut our 2008 EPS estimate $0.78 to $3.65, 2009's $0.85 to $4.15, and target price by 11 to 37. -P. Seligman
S&P MAINTAINS HOLD OPINION ON SHARES OF HUNTSMAN CORP. (HUN; 20.86):
The Hexion Chemicals unit of Apollo Management LP is suing to get out of the proposed purchase of HUN for $28 a share, agreed to in July 2007, claiming that HUN has suffered a material adverse effect. Hexion cites HUN's increased net debt and lower earnings and does not believe the banks will provide debt financing. While we think Hexion may be stretching to get out of a $325 million breakup fee - we believe HUN is suffering from the same issues as other chemicals companies - it appears the merger may not happen soon or at current terms. We are cutting our 25 target price to 20. -R. O'Reilly-CFA
S&P RAISES OPINION ON SHARES OF EVERGREEN SOLAR TO STRONG BUY FROM BUY (ESLR) 11.24):
Shares are up 10% this morning after ESLR sets two long-term sales contracts, totaling $600 million, with U.S.-based groSolar and Germany-based Wagner & Co Solartechnik. This follows $1 billion of May contracts. Production to be at Massachusetts plant slated to start up in July. Cash needs for current expansion likely to bring one last dilutive deal, but we project strong ELSR cash flow starting in 2010. We still see $0.10 a share loss in 2008 but raise 2009 EPS forecast by $0.10 to $0.65. We raise target price by 2 to 18, which is 28 times our 2009 estimate, a premium to reflect strong prospects. -M. Jaffe
S&P RAISES OPINION ON SHARES OF CASELLA WASTE SYSTEMS TO BUY FROM HOLD (CWST; 13.62):
Shares are up 13% this morning, as CWST posts April-quarter loss of $0.18, vs. $0.07 loss, both before charges, beating our estimate. Revenues rose 5.6% internally, driven by price hikes, and we project 7% revenue growth for full fiscal year 2009 (April). We see modest volume growth on the weak economy and housing market in the Northeast, but expect EBITDA margin expansion as CWST focuses on cost cuts and divestitures of non-core assets. We lift our fiscal year 2009 EPS estimate by $0.08 to $0.15, and project $0.35 for fiscal year 2010. Blending our relative and DCF-based metrics, we raise our target price 4 to 16. -S. Scharf