S&P REDUCES OPINION ON SHARES OF MARSHALL & ILSLEY TO SELL FROM HOLD (MI; 14.14):
Ahead of its second quarter results scheduled for next week, MI announces a second quarter loan loss provision of $900 million and net chargeoffs of $415 million. We modeled for loan loss provisions of $150 million. However, MI expects to maintain its dividend level for 2008. On the EPS shortfall, and our expectation that the credit quality of MI's real estate construction lending portfolio may decline further, we are reducing our full year 2008 EPS forecast to a loss of $0.31, from EPS of $1.67. We are also reducing our target price by 8 to 12, based on a below-peers multipe of 5.8 times our unchanged 2009 EPS estimate of $2.08. -E. Oja
S&P MAINTAINS SELL RECOMMENDATION ON SHARES OF MERRILL LYNCH (MER; 31.12):
According to an unconfirmed report in today's Wall Street Journal, MER may be considering the sale of its 49% interest in Blackrock Inc. (BLK; 169.60) , worth about $11 billion, and its 20% stake in Bloomberg LP, possibly worth $5 billion. None of the three companies have commented. A sale of BLK requires its board's approval and could not happen before 2009. We are maintaining our 12-month target price of 30, which assumes a multiple of 1.3 times our 12-month projected book value per share of $23 and reflects our expectation of several more quarters of write-downs at MER. -M. Albrecht, E. Oja
S&P MAINTAINS HOLD OPINION ON SHARES OF ANHEUSER-BUSCH COMPANIES (BUD; 61.75):
This morning InBev filed a consent solicitation statement for BUD shareholders to remove the current board of directors and to replace each member with InBev's own proposed slate of directors, which would include Adolphus Busch IV, uncle of BUD's current president and CEO. We do not see this action precluding a higher offer later, as InBev continues to state that it would prefer a friendly combination, but we think this puts additional pressure on the board to sit down and talk to InBev. At least 50% of the shareholders must approve the solicitation for it to become effective. -E. Kwon-CFA
S&P MAINTAINS HOLD OPINION ON BCE INC SHARES (BCE; 34.75):
We expect BCE shares to open higher following the signing of financing and credit agreements related to the private equity efforts to acquire the Canadian telco. We had concerns that credit market challenges would push the C$42.75 (US$42) purchase price lower in order for acquirers to receive funding for deal completion, but the price is unchanged, though BCE halted dividend payments before the anticipated fourth quarter closing. With other necessary approvals complete, the discount to purchase price is unwarranted, in our view. We raise our target price by 2 to 42 to reflect deal terms. -T. Rosenbluth
S&P REITERATES STRONG SELL OPINION ON SHARES OF CATAPULT COMMUNICATIONS (CATT; 7.02):
CATT warns that June-quarter results will be below expectations. The company now expects revenue of $8.5 million, compared to its prior guidance of $9.9 million, but remains hopeful about the development of long-term evolution wireless standard. However, we believe business will deteriorate in the near term due to slow adoption of new technology, reflecting the long process in finalizing the standard and further weakness in the global economy. We are widening our fiscal year 2008 (September) loss estimate to $0.56 from $0.46, and cutting our 12-month target price to 5.50 from 6 on our lowered outlook. -J. Yin