S&P MAINTAINS STRONG BUY OPINION ON SHARES OF JP MORGAN (JPM; 43.46):
JPM announces it bought the assets and certain liabilities of Washington Mutual (WM; 1.69) for $1.9 billion to be paid to the Federal Deposite Insurance Corp. JPM will take an additional $31 billion loan writedown; WM's remaining assets more than cover the upfront writedown but further loan deterioration could make the deal costlier. We think WM is a good fit for JPM giving it exposure to the California market. The deal will likely add $2B-$3B to annual earnings. We are increasing our '09 EPS estimate by $0.50, to $3.79, and our target price by $2 to $50, an above peer 13.2X '09 EPS. /S. Plesser
S&P UPGRADES OPINION ON RESEARCH IN MOTION SHARES TO BUY, FROM HOLD (RIMM; 97.53):
RIMM posts August-quarter EPS of $0.86, vs. $0.50, matching our forecast. Revenue growth of 88% vs. prior year was in line. Shares are indicated sharply lower after guidance includes lower gross margin due to new product launches to meet mass market demand. Based on RIMM's commentary and strong telco relationships, we see revenue growth as strong. We are cutting our fiscal year 2009 EPS estimate by $0.12 to $3.58 and see $4.52 in fiscal year 2010. We cut our 12-month target price by $20 to $110, based on a lower p-e of 30 times to reflect well above peers 25% growth rate and strong cash balance. -T. Rosenbluth
S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF WACHOVIA CORP (WB; 11.28):
WB's shares are down sharply this morning, amid news of the failure of Washington Mutual and uncertainty over the outcome of the government bailout plan. We believe that some form of a bailout plan will ultimately be enacted, which should give a boost to WB's distressed assets. Of concern are WB's $120 billion of Option-ARM loans, on which we believe WB has not taken adequate writedowns. However, with the stock currently selling below its tangible book value of $12.34, we think the current price of the stock reflects our concerns. -S. Plesser
S&P REITERATES STRONG BUY OPINION ON SHARES OF ACCENTURE LTD. (ACN; 37.17):
August-quarter EPS of $0.67, vs. $0.50, is $0.01 above our view. We see another year of slow-and-steady margin improvements in fiscal year 2009 (August), reflecting improving contract terms and solid execution. We look for revenue growth of 8% for fiscal year 2009, with some headwind from unfavorable forex movements. Still, ACN's bookings were a very strong $7.7 billion in August-quarter, which gives us confidence in our estimates in spite of a difficult economic environment. We are keeping our fiscal year 2009 EPS forecast of $2.87 and our 12-month target price of $47, which is based on a p-e of 15.9 times our calendar year 2009 EPS estimate of $2.96. -D. Cathers
S&P DOWNGRADES WEINGARTEN REALTY INVESTORS TO HOLD FROM BUY (WRI; 34.37):
WRI says that after completing its evaluation, it expects out-of-pocket costs related to Hurricane Ike to be in the $1-$2 million range. The company notes that all of its properties in the Galveston area, with the exception of two shopping centers and a supermarket, are open. It also advises that its funds from operations might be volatile because of uncertainty of its merchant development program. Consequently, we are trimming our 2008 per-share FFO estimate to $3.12 from $3.21, and 2009's to $3.28 from $3.32, but keeping our 12-month $35 target price. -R. McMillan