S&P Cuts Renaissance Re, Public Storage, and Simon Property

Plus: Equity analysts up EDO, start coverage of Pinnacle Airlines and comment on Adobe Systems' recent news

Renaissance Re (RNR ): Cut to 2 STARS (sell) from 3 STARS (hold)

Analyst: Cathy Seifert

We view the shares, which are up about 16% since early November, as overvalued at current levels. We see Renaissance Re's somewhat weakened capital position in the wake of its outsized hurricane losses being exacerbated by the possibility that Renaissance Re (like its peers) may have to bolster its capital position to maintain its financial strength ratings. We are also cutting our 2005 estimate to a loss of $2.50 from an operating profit of 18 cents to reflect Renaissance Re's fourth quarter hurricane losses. Our unchanged target price of $37 assumes the shares trade at 1.2 times our estimate of 2006 tangible book, a discount to some peers.

Pinnacle Airlines (PNCL ): Starts coverage with a 2 STARS (sell)

Analyst: James Corridore

We think Pinnacle Airlines is likely to lose more business from Northwest Airlines ((NWACQ.PK ), which has already cut 15 (prior story said 19) planes from Pinnacle Airlines, and recently requested bids for regional flying. This request could lead Northwest to give some of Pinnacle Airlines's business to other carriers, and will likely put pressure on Pinnacle Airlines to lower its rates. We see very little opportunity for revenue growth after 2005. Our 2006 earnings per share estimate of $1.00 represents a 56% drop from our 2005 EPS estimate of $2.25. Our 12-month target price of $4, which values the stock at 4 times our 2006 EPS estimate, is well below peers.

Adobe Systems (ADBE ): Reiterates 3 STARS (hold)

Analyst: Scott Kessler

Adobe Systems posted November quarter earnings per share of 30 cents vs. 22 cents, 2 cents above our forecast. Revenues rose 19%, paced by Acrobat and Creative Suite offerings. We are raising our fiscal year 2006 (ending November) sales projection to $2.7 billion from $2.2 billion, which now accounts for the Dec. 5 purchase of Macromedia. However, because we are including a 17 cents per share in stock-option expense in our EPS estimate, we are lowering our fiscal year 2006 forecast to $1.09 from $1.20. We are raising our 12-month target price to $38 from $36. Adobe Systems also announces that Chief Financial Officer Murray Demo will be leaving the company for personal reasons.

Simon Property (SPG ) : Cuts to 4 STARS (buy) from 5 STARS (strong buy)

Analyst: Robert McMillan

Simon Property shares have gained more than 15% in the past two months. We believe this strength was driven in part by expectations that Simon Property will continue to post solid results and expectations that the Fed is near the end of its interest rate tightening cycle. Although we expect operating trends to continue to improve, driven by an expanding economy and healthy retail conditions which should result in good occupancy levels and rent growth, given the price rise we are somewhat less positive on the shares. We are raising our target price by $1 to $85.

Public Storage (PSA ): Cuts to 3 STARS (hold) from 4 STARS (buy)

Analyst: Robert McMillan

Shares of Public Storage have gained more than 10% over the past two months and are now near our $72 target price. We expect operating trends for Public Storage to continue to improve, driven by an expanding economy which should lead to greater moving activity by U.S. households resulting in good occupancy levels and rent growth. But we think the shares are fairly valued and would not add to positions. We are keeping our 2005 and 2006 per-share funds from operations estimates at $3.62 and $3.94. Public Storage shares provide a dividend yield of 2.9%.

EDO (EDO ) : Ups to 3 STARS (hold) from 2 STARS (sell)

Analyst: Robert Friedman-CPA

Following a 20% year-over-year decline in the shares of this $600 million maker of military electronics and hardware, we believe EDO is now appropriately priced. Athough EDO is a worthwhile hold, we would not add to positions at current price levels.

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