S&P DOWNGRADES OPINION ON SHARES OF GENERAL ELECTRIC TO HOLD FROM BUY (GE; 24.59):
Hurt by volatility in financial services markets, GE cuts third quarter and full 2008 EPS guidance, and halts stock buybacks. It also notes that its GE Capital unit will not issue any more long-term debt for the rest of 2008. We are cutting our 2008 EPS estimate by $0.21 to $2.00 and 2009's by $0.33 to $2.05. While the infrastructure businesses remain solid, as we expected, we think challenges in financial businesses will limit overall results through 2009, though the federal bailout should provide a floor to that market. We are cutting our target price by $13 to $25, 12 times our 2009 EPS estimate. -R. Tortoriello, M. Jaffe
S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF WASHINGTON MUTUAL (WM; 2.31):
According to the Wall Street Journal, WM has approached a number of investment firms, including Carlyle Group LLC and Blackstone Group LP (BX), to gauge their interest in a potential takeover. The two companies would team up with Texas bank investor Gerald J. Ford. It isn't clear if those discussions will result in a deal and WM is also exploring a sale to another financial institution. We are keeping our 12-month target price of $4, equal to a price-to-book multiple of roughly 0.30 times applied to current book value per share of $13.35, significantly below WM's historical average. -K. Cole, E. Oja
S&P REITERATES BUY RECOMMENDATION ON SHARES OF NIKE, INC. (NKE; 62.21):
NKE beats our August-quarter EPS estimate of $0.95, posting $1.03, vs. $1.12. Sales rose 17%, above our 8% estimate, but were up 10% excluding forex. U.S. Nike retail posted an 8% same-store sales gain. We believe the Beijing Olympics drove brand awareness and product innovation with new footwear and equipment products for all 28 sport categories where NKE participates. Nike brand futures are up 9%, which we see driving continued share gains over the next six months. Gross margin expanded 230 basis points. We boost our fiscal year 2009 (May) EPS projection by $0.10 to $3.95 but keep our $78 target price. -M. Driscoll-CFA
S&P MAINTAINS HOLD OPINION ON SHARES OF GOODYEAR TIRE (GT; 16.37):
We believe GT's draw of $600 million under its credit facility reflects more a delay in accessing money market funds than concerns about credit market liquidity, although we do not discount that being a factor too. We expect a loss in excess of $10 million for GT as its money market fund "broke the buck" and is likely to pay out $0.97 or less per $1.00 of face value. Separately, on global economic concerns, we are reducing our EPS estimates for 2008 and 2009 by $0.36 and $0.18, to $2.09 and $2.63, and our target price by $3 to $19 based on p-e analysis. -E. Levy-CFA
S&P MAINTAINS SELL OPINION ON SHARES OF CAPITAL ONE FINANCIAL (COF; 48.29):
COF's shares are down sharply in this morning's trading, as the company announces details of its stock offering plan. Specifically, COF is offering 14 million shares at $49 a share and will raise $686 million through the offering. The price is roughly 6.6% lower than yesterday's close. We are maintaining our 12-month target price of $47, a below-historical 9.6 times our 2008 EPS estimate of $4.90. Although the company reaffirmed its 2008 guidance yesterday, we think rising unemployment is apt to result in higher charge-offs, thus putting pressure on earnings. -S. Plesser