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Markets & Finance

S&P Slashes Goodyear Forecast


Plus: Analyst opinions on General Motors and EGL Inc.

From Standard & Poor's Equity ResearchGoodyear Tire & Rubber (GT)

Reiterates 3 STARS (hold)

Analyst: Efraim Levy, CFA

We are reducing our 2006 profit forecast to include the estimated impact of the recently resolved United Steel Workers union strike against Goodyear. For the fourth quarter, we now project a loss of $1.84 per share, versus our prior EPS estimate of 19 cents; for all of 2006, we see a loss of 77 cents, reduced from our prior EPS estimate of $1.16. For 2007, we forecast EPS of $1.67. Our 12-month target price remains $22, about 13 times our 2007 EPS estimate, in the middle of Goodyear's recent range.

General Motors (GM)

Reiterates 2 STARS (sell)

Analyst: Efraim Levy, CFA

Automakers are scheduled to report sales figures tomorrow. We project a decline of about 1% year-over-year in December light vehicles sales volume. For all of 2006, we project light vehicle volume of 16.6 million, down from 2005's 16.95 million. For 2007, we expect volume to fall about 1.2% to 16.4 million on slowing real GDP growth. We expect GM, Ford (F), and DaimlerChrysler's (DCX) Chrysler Group to each lose market share for the month and year, with Japanese brands gaining most of the share. We expect the traditional Big Three to lose market share again in 2007.

EGL Inc. (EAGL)

Reiterates 3 STARS (hold)

Analyst: James Corridore

The company has received a buyout offer from its CEO and General Atlantic LLC for $36 per share cash, or about 0.45 times sales, below peers on that metric but a 21% premium to Friday's close. As EGL's CEO is the largest stockholder, and chairman of the board, we think there is a good chance this deal will be approved by the board. However, as recently as six months ago, the shares traded about 40% higher than this offer, and a large part of the stock price decline, we think, has been related to management and accounting issues. We are keeping our 12-month target price at $40.


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