Intel (INTC ) : Ups to 4 STARS (buy) from 3 STARS (hold)
Analyst: Thomas Smith, CFA
Intel posted third quarter earnings per share of 32 cents (including a 2 cents legal settlement charge) vs. 30 cents, below our 36 cents estimate. Revenues rose 18% year over year and 8% quarter over quarter, near the typical seasonal pace. We are lowering our earnings per share estimate for 2005 to $1.42 from $1.47, but lifting our 2006 estimate to $1.60 from $1.56 based on our projection for slightly better industry strength in 2006. We are raising our 12-month target price by $1 to $30 based on applying a p-s below Intel's historical average to our forward sales estimate. We see Intel nearing cycle trough levels on p-s and upgrade the stock to buy on its improving valuation picture.
Nokia ADRs (INTC ): Downgrades to 2 STARS (sell) from 3 STARS (hold)
Analyst: Kenneth Leon, CPA
The stock price has risen 8% since the last week of August, and Nokia gave a positive guidance update on Oct. 15. While we expect the company to announce strong third quarter numbers, we believe the good news is already reflected in share price. Although we expect third quarter margins to benefit from handset market share gains, we think the long-term margin scenario is challenging, due to intensifying competition, rising input prices and a cautious operator environment we see. Based on a combination of discounted cash-flow, enterprise value/EBIT, and p-e multiples, our 12-month target price falls to $16 from $17.
Yahoo (YHOO ) : Reiterates 4 STARS (buy)
Analyst: Scott Kessler
Excluding one-time asset sales, Yahoo posted earnings per share of 16 cents (GAAP 17 cents) vs. 9 cents (GAAP 17 cents), above our forecast of 13 cents and the Street consensus of 14 cents. Revenues excluding traffic acquisition costs rose 42%, 5% above our forecast, on strength in marketing services and fees. We are positive on Yahoo's strategy of diversified online advertising and fee generating services, underscored by a recent deal with BellSouth (BLS ). We are raising our 2005 earnings per share forecast to 61 cents from 57 cents, and keeping our 2006 estimate at 76 cents. Our 12-month target stays $42, based on discounted cash flow analysis.
Allstate (ALL ) : Maintains 5 STARS (strong buy)
Analyst: Cathy Seifert
We are lowering our 2005 earnings per share estimate to $3.00 from $6.10 to reflect our preliminary estimate related to Hurricanes Katrina and Rita claims. While Allstate has not provided any guidance or estimate of its losses, our projection assumes it will incur pretax losses from both storms of about $3.7 billion (including $3.2 billion from Katrina). Despite the magnitude of these losses, we do not expect Allstate to have to raise additional capital. Our target price remains $64, or 1.7 times our projected tangible book value, about in line with peers. Allstate is set to release third quarter earnings after the market close on 10/19/05.