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Stock Picks: Allstate, Pfizer, Sirius XM

Wall Street analysts offer buy, sell, or hold opinions on stocks in the news on Aug. 3

Allstate: Credit Suisse equity analyst Vinay Misquith reiterated an outperform rating on shares of Allstate (ALL), the largest publicly traded U.S. home and auto insurer, on Aug. 3, with a price target of 41. Misquith said that "the stock is pricing in a severe hurricane season since this year is forecasted to be the second worst year for hurricanes … anything less should be a positive catalyst for the stock." The analyst said investors may be buying Allstate shares starting in the first week of September, "if hurricane activity in August is normal." He noted that Allstate has reduced homeowners' market share exposure to hurricane-exposed states in the Gulf Coast by 22 percent, and in the southeastern U.S. by 7 percent, since 2005. Misquith said Allstate's personal auto insurance policies in force (PIF) declined at a percentage rate "in the low single digits since 2008 as customers shopped for cheaper polices during the recession and the company raised pricing significantly last year." He said he expects quarter-over-quarter improvement in the rate of declines in personal auto PIF starting in the fourth quarter of this year or first quarter of 2011. "Based on our analysis of the company's capital position, we believe the company can announce a [stock] buyback for the first time in two years, in the first quarter of next year," Misquith wrote. "Should the hurricane season be normal, the buyback announcement could occur in the fourth quarter of this year." Pfizer: Standard & Poor's equity analyst Herman Saftlas reiterated a buy rating and 19 price target on shares of Pfizer (PFE) on Aug. 3. On Aug. 3. the drugmaker reported a second-quarter profit that beat analyst estimates after sales were boosted by a weaker dollar and products from its acquisition of Wyeth. Profit excluding one-time items was 62¢ a share, beating the 52¢ average estimate of 15 analysts surveyed by Bloomberg, the New York-based company said in a statement. Revenue increased 58 percent to $17.3 billion, $696 million more than analysts had estimated. Sales benefited from a $584 million gain in foreign currency exchange and from the addition of the Enbrel arthritis treatment and Prevnar pneumonia vaccine acquired in Pfizer's $68 billion takeover of Wyeth last year. The company reaffirmed its forecast for 2010, saying earnings may be at the higher end of the target. Pfizer is counting on the Wyeth products to help offset losses next year, when generic copies of its top-selling Lipitor cholesterol pill enter the market. The drugmaker also has been slashing costs by firing 19,000 employees, closing eight manufacturing plants, and shutting six research centers as it braces for the loss of Lipitor's patent protection. At the end of 2009, it had fired 40,000 employees over the past six years. In a posting on the S&P MarketScope service, Saftlas said the company's second-quarter adjusted earnings per share (EPS) were 7¢ above his estimate; revenues were also ahead of his forecast. Saftlas said profits also benefited from reduced selling, general and administrative (SG&A) and research and development (R&D) cost ratios "from merger synergies and other cost restructurings." "Despite the challenges of austerity pricing in Europe and U.S. healthcare reform, we are encouraged that PFE maintained its EPS forecasts of $2.10 to $2.20 for '10, and $2.25 to $2.35 for '12," Saftlas said. He noted the stock's 4.5 percent dividend yield. Sirius XM Radio: Wunderlich Securities equity analyst Matthew Harrigan maintained a hold rating on shares of Sirius XM Radio (SIRI) on Aug. 3. On July 7, the only U.S. satellite radio broadcaster said it will have 1.1 million net new subscribers for the year, after adding more than 583,000 in the second quarter. Sirius said it would have more than 500,000 net additions for the year when it reported first-quarter results in May, and two weeks later raised that forecast to 750,000. In a note, Harrigan said he retains "a favorable bias" on Sirius shares, "albeit with a Hold rating." He said the company's forecast of 583,000 new subscribers in the second quarter "blew through" his 275,000 estimate. The company's offering "continues to resonate with healthier higher-end consumers," Harrigan wrote. Harrigan estimates that sales rose 12.7 percent in the second quarter, to $684.7 million, with adjusted income from operations up 12.1 percent, to $148.3 million.

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