S&P Upgrades Pfizer, Qwest

Plus: Analysts boost Hologic, downgrade Powerwave Technologies, and more

From Standard & Poor's Equity Research

Pfizer (PFE) : Ups to 5 STARS (strong buy) from 4 STARS (buy)

Analyst: Herman Saftlas

We expect Pfizer to benefit from investor rotation to large-cap, high quality, defensive drug names. We also see new Chief Executive Officer Jeff Kindler as likely to take strategic initiatives to enhance shareholder value. Pfizer expects to generate $34 billion cash flow after capex and dividends over the next 30 months, with half slated for stock buybacks and half for acquisitions. We see Pfizer's earnings per share (EPS) rising at a mid- to high-single-digit rate over the 2007-2010 period. We are raising our 12-month target price by $3 to $31.

Qwest Communications (Q) : Ups to 2 STARS (sell) from 1 STAR (strong sell)

Analyst: Todd Rosenbluth

Second quarter EPS of 6 cents vs. a loss of 9 cents, is 5 cents above our estimate. Revenues were lighter than we expected, but earnings before interest taxes depreciation and amortization margin was wider than anticipated. We are surprised by Qwest's relative access-line stability compared with peers, amid rising competition. We are boosting our 2006 EPS estimnate by 12 cents to 19 cents, and we see 22 cents in 2007. We are raising our 12-month target price by $1.50 to $6. However, we view Qwest as overvalued at its current price, given its lack of dividend, limited revenue growth, and high debt load.

Hologic (HOLX) : Ups to 4 STARS (buy) from 3 STARS (hold)

Analyst: Robert Gold

After a recent pullback, we believe the shares have become more compelling. On 7/25, Hologic Shares posted June quarter results we view as solid, which led us to boost our fiscal year 2006 (ending September) revenue forecast by $49 million to $449 million, and our operating EPS estimate by 4 cents to 91 cents after stock option cost. Though we have concerns about the potential for heightened competition in the digital mammography market, we still see a three-year sales growth rate of 23% and EPS growth rate of 27%. Our 12-month target price stays $51.

Patni Computer Systems (PTI) : Ups to 3 STARS (hold) from 2 STARS (sell)

Analyst: Dylan Cathers

Second quarter operating earnings per ADS of 20 cents vs. 22 cents is 5 cents higher than our estimate. Revenue growth in the quarter was 32%, and we expect this pace to continue through 2006, reflecting growth of new clients and strength in the telecom and manufacturing verticals. We think operating margins will continue to be hurt by rising wage and hiring costs, although not to the extent that we previously expected. We are raising our 2006 earnings per ADS estimate by 12 cents to 98 cents, and our 12-month target price by $6 to $17.

Powerwave Technologies (PWAV) : Cuts to 3 STARS (hold) from 5 STARS (strong buy)

Analyst: Kenneth Leon, CPA

Powerwave Technologies posts second quarter earnings per share (EPS) of 13 cents vs. 13 cents, before special items, 3 cents below our estimate and a penny below the Street consensus. Second quarter sales of $232 million were at the low end of Powerwave Technologies's guidance, but the company's gross margin widened to 24% from the first quarter's 21%. We are disappointed with the company's third quarter outlook for revenues of $200 million to $210 million due to weak demand from Cingular, a key customer. We see sales only 5% higher in 2006. We are lowering our 2006 EPS estimate to 35 cents from 60 cents and our 2007 estimate to 50 cents from 85 cents. Based on near-peer 18 times our 2007 EPS estimate, we are lowering our 12-month target price to $9 from $18.

Sirius Satellite Radio (SIRI) : Reiterates 5 STARS (strong buy)

Analyst: Tuna Amobi, CPA and CFA

After pre-announced strong second quarter net adds of 640,460, the second quarter loss of 16 cents before a penny one-time charge, vs. a 13 cents loss is in line with our estimate and a penny wider than the Street's. We see momentum at retail and Original Equipment Manufacturer channels. We note subscriber acquisition costs were a bit higher than we expected, but with in-line churn and potentially higher pricing power. Sirius Satellite Radio slightly raises its 2006 year-end subscriber target to 6.3 million from 6.2 million, potentially suggesting it sees no material product shipment delays due to a lingering Federal Communications Commission probe on emission limits for certain plug-and-plays. We will update.

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