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S&P Keeps Buy on AMR Amid Buyout Rumors

Plus: Analysts' comments on GM, Compass Bancshares, Campbell Soup, and more

From Standard & Poor's Equity ResearchAMR Corp. (AMR): Reiterates 4 STARS (buy)

Analyst: Jim Corridore

An unconfirmed BusinessWeek report says AMR is a buyout target for a group including British Airways (BAB) and Goldman Sachs (GS). While we would not be surprised if AMR, or any major airline, is taken private or acquired in today's merger and private equity climate, we think it is unlikely British Airways would be able to acquire AMR, given U.S. limits on foreign ownership of U.S. airlines. AMR has a market cap of $8 billion, a ratio of enterprise value-to-sales of less than 1 and we think will see strong 2007 EPS growth, reasons we find its shares attractive for capital appreciation potential.

General Motors (GM): Reiterates 2 STARS (sell)

Analyst: Efraim Levy, CFA

We do not regard the unconfirmed report in Automotive News that GM is contemplating buying Chrysler from DaimlerChrysler (DCX) as credible. We see no rationale for GM to purchase its struggling competitor. We note GM has considerable financial and operational challenges of its own, and think it would be dragged down further by Chrysler's losses and legacy obligations. On relative basis, in our view, talks with Nissan (NSANY) and Renault had more logic. But in both cases, our view is GM has little to gain and should not be distracted from its own turnaround plans.

Compass Bancshares (CBSS): Maintains 3 STARS (hold)

Analyst: Erik Oja

Compass Bancshares announces the signing of an agreement to be acquired by Banco Bilbao Vizcaya Argentaria (BBV) for either $71.82 cash or 2.8 shares of BBV (worth $73.44 at yesterday's closing price of $26.23) per CBSS share. Accordingly, we are raising our 12-month target price to $72 from $59, which equates to 19.0 times our 2007 EPS estimate of $3.79. The transaction, which requires bank regulatory approvals in the U.S. and Spain, and the approval of the stockholders of each company, is expected to close in the second half of 2007.

Campbell Soup (CPB): Reiterates 3 STARS (hold)

Analyst: Tom Graves, CFA

Before special item, January-quarter earnings per share of 68 cents, vs. 58 cents, bests our estimate by 6 cents. Profit from its U.S. soup, sauces & beverages segment rose 13%, despite U.S. soup sales down 1%. We expect improved-convenience and lower-salt products to help longer-term soup sales. We are increasing our fiscal year 2007 (July) EPS estimate to $1.95 from $1.90. In the second half, we expect more of a year-to-year rise in marketing and selling expense. We are increasing our fiscal year 2008 EPS estimate to $2.07 from $2.03. On higher EPS estimates, we are raising our target price by $4 to $42. Indicated dividend yield is 1.9%.

Bed Bath & Beyond (BBBY): Downgrades opinion to 4 STARS (buy) from 5 STARS (strong buy)

Analyst: Michael Souers

Shares have increased about 35% over the past 7 months, and we are lowering our recommendation on valuation. However, we continue to view Bed Bath & Beyond favorably due to our view of its recent execution, solid growth prospects and strong balance sheet. We still estimate fiscal year 2007 (February) and fiscal year 2008 EPS at $2.14 and $2.40, respectively, but we are raising our 12-month discounted cash flow (DCF)-based target price by $1 to $48 due to projected improvement in operating margin once the housing market rebounds. With BBBY trading at a p-e-to-growth of about 1.2, a slight discount to S&P 500, we would buy.

Molson Coors (TAP): Downgrades to 2 STARS (sell) from 3 STARS (hold)

Analyst: Raymond Mathis

Molson Coors posts fourth-quarter EPS of $1.14, vs. 26 cents, as sales volume grew 5.2% benefitting from an additional week in the period, which added 6%. Cost of good sold rose 10.5% as the price of inputs continued to rise. Nonetheless, results topped our 91 cents estimate, aided by foreign currency benefits, a $4.6 million credit on options to executives, against a $12.9 million loss on discontinued operations. We believe Molson Coors continues to lose marketshare, while cost inflation outstrips merger-related synergies. We are raising our DCF-based 12-month target price by $7, to $83, below current market.

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