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S&P Picks and Pans: Wyeth, AT&T, Texas Instruments, EMC, UAL

Analysts' opinions on stocks in the news

From Standard & Poor's Equity ResearchWyeth (WYE; $51.66)

Downgrading to hold from buy

Analyst: Herman Saftlas

Citing possible heart and liver risks, FDA asks for more studies on WYE's Pristiq treatment for menopausal symptoms. We view this as a major setback, probably indicating at least a 2-year delay in the commercialization for menopause symptoms, and for a more important depression indication that WYE needs before Effexor XR goes off patent in 2010. On the plus side, we still think WYE's pipeline is fairly robust with new drugs for schizophrenia, Alzheimer's, and osteoporosis. We are lowering our target price by $5 to $57 on revised discounted cash flow assumptions. WYE's dividend yield is 2.0%.

AT&T (T; $39.74)

Maintains hold opinion

Analyst: Todd Rosenbluth

Following its second quarter EPS confernece call, we believe AT&T's fundamentals are improving. EPS of $0.68, before $0.02 of one-time benefits from taxes and asset sale, beat our estimate by $0.03. We are increasing our 2007 EPS estimate by $0.07 to $2.75, and our 2008 estimate by $0.12 to $3.00. We see results being driven primarily by wireless revenue growth, operating expense control and share buybacks, with gains partly offset by ongoing consumer wireline challenges. We are raising our 12-month target price by $1 to $41, based on a blend of relative p-e and enterprise value/EBITDA analyses.

Texas Instruments (TXN; $38.18) :

Reiterating buy opinion

Analyst: Clyde Montevirgen

TXN reports second quarter EPS of $0.42 vs. $0.47, a penny below our estimate. Revenues rose 7% from last quarter, reflecting notable strength for analog, DSP, and DLP chips. Gross margins widened on more favorable sales mix and utilization. Contained operating costs aided operating margins. We continue to see high-performance analog and DSP products driving healthy growth, and see margins steadily expanding toward TXN's stated goals. We are keeping our 2007 EPS estimate of $1.83, but raising our 12-month target price $5 to $44, based on our view of stronger '08 growth.

EMC Corp. (EMC; $19.28

Upgrades to strong buy from buy

Analyst: J. Hingorani

After a strong second quarter report today, we see several factors to build momentum for EMC shares going into the seasonally stronger second half. Strength across all market segments and geographies, new products, and universal acceptance of virtualization make EMC shares highly attractive, in our opinion. We think investors will also value EMC for a remaining stake in VMWare after the unit's upcoming IPO. We are raising our 12-month target price $1 to $24, 26.7 times our 2008 estimate, boosted $0.05 today, to $0.90. The p-e is a bit above peers to reflect EMC market position and history of execution.

UAL Corp. (UAUA; $48.73)

Upgrades to hold from sell

Analyst: Jim Corridore

Second quarter EPS of $1.83 vs. $0.93 exceeds our $1.75 estimate. We believe UAL did a good job managing capacity and yields in the second quarter, which we now think is likely to continue into the third quarter. While we think UAL may be at a cost disadvantage to peers in a downturn, its customer service and international model is helping it outperform the industry during the current industry upswing. With revenue trends better than we had expected, we are raising our 12-month target price to $52 from $24, valuing the shares at 13 times our 2008 estimate set today at $4.00. Our concerns about high jet fuel prices continue.

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