S&P REITERATES HOLD RECOMMENDATION ON SHARES OF LEHMAN BROTHERS (LEH; 8.02):
We view restructuring plans announced today favorably, but we remain cautious on the shares based on extensive remaining execution risk. We think shareholders benefit from a spinoff of commercial real estate assets, but mark-downs may remain for November-quarter. We think a sale of the investment management stake would provide capital and allow for some participation in profits, but terms are not yet set. We think long-term LEH profitability is impaired but not compromised. Our fiscal year 2008 (November) loss estimate widens to $10.26 from $7.44, and we trim our target price $6 to $14, 0.5 times book value. -M. Albrecht
S&P REITERATES BUY OPINION ON SHARES OF FEDEX CORP. (FDX; 84.75):
FDX sees August-quarter EPS of $1.23 when it reports results Sept 18. This forecast is better than prior guidance of $0.80-$1.00, our $1.06 estimate, and the Street's $0.95 forecast. FDX says lower fuel costs helped, but a slowing U.S. economy is spreading globally. The company reiterated its fiscal year 2009 (May) EPS guidance of $4.75-$5.25. However, we are raising our fiscal year 2009 EPS forecast to $5.50 from $5.34 and starting fiscal year 2010's at $6.10. We are raising our 12-month target price to $105 from $96, 19 times our fiscal year 2009 EPS estimate, still at the low end of historical p-e range to reflect economic concerns. -J. Corridore
S&P REITERATES HOLD OPINION ON SHARES OF IMCLONE SYSTEMS (IMCL; 68.31):
IMCL's board rejects as inadequate the $60 cash buyout offer from Bristol-Myers Squibb (BMY; 21.69) . In addition, Chairman Carl Icahn say that IMCL has received $70 per share cash offer from a "large pharmaceutical company," subject to due diligence. While IMCL has not determined whether the new offer would be adequate, we see demand for biotech assets from large pharma companies resulting in a completed transaction in the current price range, either from new suitor or raised BMY bid. We boost our 12-month target price by $5 to $70, in line with the newly revealed offer. -S. Silver
S&P RAISES RECOMMENDATION ON SHARES OF CONTINENTAL AIRLINES TO BUY FROM HOLD (CAL; 15.65):
We think recent 30%-plus pullback in the price of oil combined with looming fourth quarter industry capacity cuts have improved fundamentals. We are raising our 2008 and 2009 estimates to a loss per share of $3.00 and EPS of $2.00 from a $4.00 loss and a $2.50 loss. We expect oil prices and CAL's stock price to continue to have large, volatile swings and we categorize the stock as high risk. Even so, we are raising our target price to $25 from $12, valuing the shares at a ratio of enterprise value to EBITDAR (EBITDA plus aircraft rent) of 3 times our 2009 EBITDAR forecast, still below peer average. -J. Corridore
S&P REITERATES SELL RECOMMENDATION ON SHARES OF APPLE (AAPL; 150.79):
Apple's "Let's Rock" press event on Sept. 9 showcased upgrades to the iPod product line, which contributed 35% of fiscal year 2007 (September) sales, including a new iPod Nano that is thinner and offers innovative user interface features such as "shake to shuffle." We think new products should help drive seasonal sales, but we note the relative lack of attention to PCs and iPhones. Also, the price cuts on the iPod Touch line are symptomatic of margin pressures we foresee for AAPL. We are maintaining our EPS estimates of $5.22 for fiscal year 2008, and $6.00 for fiscal year 2009, and our 12-month target price of $140. -T. Smith-CFA