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S&P Picks and Pans: Toyota, AHM, Barclays, Nokia


Analyst opinions on stocks making headlines Friday

From Standard & Poor's Equity ResearchS&P REITERATES HOLD OPINION ON ADSS OF TOYOTA MOTOR (TM; $119.51)

Toyota posts June-Q net income up 32% to 492 billion yen, exceeding our 367 billion yen forecast. We expect FY 08 (Mar.) sales to rise 10% on higher volume and an increased financial services contribution. We are lifting our earnings per ADS estimate for FY 08 by $0.76 to $10.14, based on a 119X JPY/$1 exchange rate. We see near-term challenges in the U.S. automotive market, but with our favorable view of TM's long-term growth prospects and balance sheet strength, and our outlook for a rising dividend, we keep our 12-month target price at $142, based on relative and historical P/E. /E. Levy, CFA

S&P REITERATES SELL RECOMMENDATION ON SHARES OF AMERICAN HOME MORTGAGE (AHM; $1.04)

Given the lack of liquidity in a number of mortgage markets in which AHM holds significant assets, we think a potential outcome for AHM is bankruptcy and liquidation. Prices being paid for mortgage securities in the secondary market have declined significantly in recent weeks. As a result, we expect a large EPS loss due to write-offs in '07, but we have no way of quantifying the magnitude of these losses, given a lack of publicly available information. We are placing our EPS estimates under review. /J. Willey

S&P UPGRADES ADSS OF BARCLAYS PLC TO STRONG BUY FROM BUY (BCS; $55.66)

Operating expenses were higher than expected in first half '07, we believe a reflection of growth in costs at int'l businesses. BCS is increasing its retail banking activities in western Europe and emerging markets, and we expect continued expansion outside the traditional core U.K. retail bank will bolster future revenues. We are increasing our '07 earnings per ADS estimate to $5.82 from $5.68, and '08's to $6.40 to $6.24 (numbers incorrect in prior story), and boosting our target price by $2, to $67, on recent currency fluctuations, using foreign exchange ratio at $2.00 per GBP. /D. Chambers

S&P MAINTAINS HOLD OPINION ON ADSS OF NOKIA (NOK; $30.90)

NOK posts Q2 adjusted earnings per ADS of $0.44 vs. $0.36, above our $0.37 estimate. Operating margin for the combined mobile device business was 20.9%, wider than we forecast, aided by a 38.5% global market share. We expect market share gains and segment margin strength to continue in the second half of the year, though we see slight margin pressure in '08. However, we remain concerned about the network joint venture, which was weaker than expected despite a restructuring. We are increasing our 12-month target price for by $2 to $32, based on adjustments to our discounted cash-flow analysis. /I. Soderbom


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