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Analyst Actions: CSX, Intel, Seagate

From Standard & Poor's Equity ResearchMERRILL UPGRADES CSX TO BUY FROM NEUTRAL

Merrill Lynch analyst Ken Hoexter says, with his upgrade of CSX (CSX), he's setting a $71 target price based on a 16.5 multiple on his $4.30 2009 EPS estimate.

Hoexter believes that after a 16% pullback from its May high, CSX stock is near its seasonal bottom (notes rail stocks have fallen 19% on average over the past three years from spring highs). He also thinks CSX's strong operations improvement is evidence of its ability to grow earning despite a challenging economic environment.

He says second quarter non-GAAP EPS of $0.89 was $0.01 below his estimate but in line with the consensus forecast. He also notes CSX said it's on track to post 2008 EPS at the upper end of its $3.40-$3.60 target range. He raises $3.53 2008 EPS estimate to $3.55.


Friedman Billings analyst Craig Berger says Intel's (INTC) second quarter revenue and third quarter revenue guidance were better than expected and definitely better than feared.

Berger notes that the company said PC demand remains reasonably robust heading into the third quarter, and units are expected to grow 9% quarter-to-quarter (mid-point) off of a better-than-seasonal base of shipments in the second quarter. Also, $0.28 second quarter GAAP EPS beat his estimate of $0.26 mostly on a better-than-expected tax rate. He raises $1.22 2008 EPS estimate to $1.26 and $1.40 for 2009 to $1.48.

But while INTC is more attractively priced after the market's recent sell-off, he remains on the sidelines given some softening PC checks, decelerating PC unit shipment comps and his view that other stocks offer more compelling upside.


JPMorgan analyst Mark Moskowitz says Seagate Technology's (STX) $0.44 fourth quarter non-GAAP EPS is better than consensus and just below his recently-raised estimates. He notes guidance of $3.15-$3.30 billion first quarter revenues and $0.22-$0.26 non-GAAP EPS, vs. his expectations of $3.191 billion and $0.56.

Moskowitz says a weaker pricing environment and continued shipment of higher cost products will weigh on margins in the near term. Perplexed by STX's suggestion that visibility is a little more limited than usual, even while the company expects normal seasonal unit growth in the first quarter for HDD industry. He cuts $2.39 fiscal year 2009 (June) non-GAAP EPS estimate to $1.51.

He expects major near-term pain in the shares; competitive dynamics, STX's trailing market position in high-cap, retail and macro are lending to disappointing margin guidance.

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