American International Group (AIG): Reiterates 4 STARS (buy)
Analyst: Catherine Seifert
AIG was among a number of insurance stocks down slightly on Dec. 27 amid news of the 9.0 earthquake and tsunami that hit parts of Asia this past weekend. Although no insurers have yet announced any loss estimates, we expect that AIG, ACE Ltd. (ranked hold by S&P), XL Capital (hold) and RenaissanceRe (sell) may have some exposure to this catastrophe. In addition to property losses, we think
business interruption losses will also likely emerge from this
disaster. Currently, we do not see these claims as significant to these firms.
ConocoPhillips (COP): Reiterates 3 STARS (hold)
Analyst: Tina Vital
ConocoPhillips purchased 7.59% of Lukoil shares in September 2004, and according to news reports late last week, has increased this stake by 2.4%. Further, the company signed a memorandum of understanding with Gazprom to study development of Russia's giant Shtokman gas field. Based on our revised oil and gas price projections, and new estimates for ConocoPhillips's Lukoil stake, we are raising our 2004 earnings per share estimate by 61 cents to $11.40 and 2005's by 72 cents to $10.26. A blend of our discounted-cash-flow and peer multiples leads us to raise our 12-month target price by $7 to $93, or 9 times our 2005 earnings per share estimate, a discount to peers.
Tootsie Roll (TR): Reiterates 3 STARS (hold)
Analyst: Anishka Clarke
Our 12-month target price of $37, raised today from $33 based on discounted-cash-flow and p-e analyses, reflects our higher earnings per share projections from the Concord Confections purchase in August for $214 million. We believe the transaction has added product depth with well-known bubble gum brand, Dubble Bubble. We also see cross-sell opportunities enhancing long-term growth. We are raising our 2004 earnings per share estimate to $1.31 from $1.28, and 2005's to $1.68 from $1.39. At its current price, we would hold Tootsie Roll, based on what we see as a very strong brand portfolio, take-over potential, and steady cash flow growth.
Sealed Air (SEE): Reiterates 3 STARS (hold)
Analyst: Stewart Scharf
We expect at least $25 million in annualized cost savings from Sealed Air's restructuring efforts, as the company relocates operations at three foreign facilities. Sealed Air now projects fourth-quarter charges of 20 cents to 23 cents, up from earlier guidance of 7 cents to 10 cents. We think margin expansion in 2005 will be limited by high petrochemical costs. Our 2004 earnings per share estimate remains $2.65, before about 40 cents total charges. With the stock at 16.7 times our $3.15 2005 earnings per share estimate, below historical levels and at a discount to intrinsic value based on our revised discounted-cash-flow model, we are lifting our 12-month target price to $57 from $51.
Woodward Governor (WGOV): Maintains 3 STARS (hold)
Analyst: Bryon Korutz
Given our expectation of continued growth in the industrial controls segment from greater demand in Asian markets, coupled with market share gains, we are boosting our fiscal 2005 (ending September) earnings per share estimate to $3.65 from $3.50. We are also raising our 12-month target price by $6 to $74, based on our discounted cash flow model and forward peer p-e analyses. We project that the after-market repair and overhaul business will benefit from the trend toward airlines outsourcing maintenance to third-party contractors. We would hold Woodward Governor.
Freescale Semiconductor (FSL.B): Initiates coverage with 3 STARS (hold)
Analyst: Amrit Tewary
Freescale Semiconductor is a global chipmaker focused on providing products to the automotive, networking and wireless communications industries. We see 2005 revenues rising 4.1% from projected 2004 levels, as we believe low-teens growth in wireless segment sales and mid-single digit growth in transportation segment sales should more than offset a mid-single digit sales decline in the networking segment. We estimate operating earnings per share of 80 cents in 2004 and 85 cents in 2005. We believe the shares are fairly valued, based on our p-e and price-to-sales analyses. Our 12-month target price is $19.
Elbit Systems (ESLT): Upgrades to 4 STARS (buy) from 3 STARS (hold)
Analyst: Stewart Scharf
Shares are up 7% today as Elbit Systems agrees to purchase a 32% stake in military communications firm Tadiran Comm. from Koor Industries for $146 million. Koor will buy a 9.8% stake in Elbit from Federmann Enterprises for $24.70 per share. We see further consolidation in the Israeli defense industry, and expect Elbit to focus on acquiring government-run companies and investing in new technologies. At 18 times our $1.45 earnings per share estimate for 2005, the shares are at a discount to peers. Applying forward peer p-e multiple to our 2005 estimate, we are raising our 12-month target price to $31 from $24.