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Analyst Actions: UAL, Continental Airlines, Hewlett-Packard


From Standard & Poor's Equity ResearchSOLEIL DOWNGRADES AIRLINES TO NEUTRAL; CUTS UAL TO SELL, CONTINENTAL TO HOLD

Soleil analyst James Higgins says he downgraded airline stocks to neutral from outperform due to the relentless surge in fuel prices and liquidity concerns it raises.

He downgrades UAL (UAUA) to sell from buy as he believes the carrier in particular appears to have increased probability of being forced in Chapter 11 by sometime next year if fuel prices do not fall back to sustained lower levels. He cuts 30 price target for UAL shares to 7.

Higgins downgrades Continental Airlines (CAL) to hold from buy. While he believes Continental has lower odds than AMR (AMR) of being forced in Chapter 11 by sometime next year if fuel prices do not fall back to sustained lower levels, it appears likely to be closer to that edge than a bullish stance warrants. He cuts 30 price target for Continental shares to 17.

BANC OF AMERICA CUTS PRICE TARGET FOR HEWLETT-PACKARD

Banc of America analyst Scott Craig says Hewlett-Packard's (HPQ) $28.3 billion second quarter revenue compares to his $28.2 billion estimate and $29.9 billion consensus, while $0.87 non-GAAP EPS vs. his $0.86 and $0.84 consensus.

Craig says overall it had a pretty solid quarter and outlook, although revenue growth appears to be slowing in number of geographies, and is slowing/stalled in two key product segments (printing, PCs). He believes HPQ is shifting from revenue growth and margin expansion story to just a margin expansion story. He notes constant currency growth is more challenging.

He keeps $3.56 fiscal year 2008 (October) EPS estimate and trims $4.08 fiscal year 2009 to $4.07, but lowers 57 price target to 53 to reflect lower revenue assumptions given more challenging demand environment. He maintains a buy opinion on the stock.


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