Public Service Enterprise Group (PEG)
Ups to 4 STARS (buy) from 3 STARS (hold)
Analyst: Justin McCann
Third quarter operating EPS of $1.48 vs. $1.14 is well above our $1.27 estimate. EPS from the power segment rose by $0.55 to $0.81 on higher realized prices under forward sales contracts, while energy holdings rose by $0.20 to $0.40 aided by mark-to-market treatment of widening margins in Texas business. We are increasing our 2006 EPS estimate by just $0.10 to $3.75, since we expect to see some of the mark-to-market gains reversed in the fourth quarter, and our 2007 EPS estimate by $0.20 to $4.80. We are raising our target price by $2 to $68.
Cullen Frost Bankers (CFR)
Ups to 5 STARS (strong buy) from 3 STARS (hold)
Analyst: Stuart Plesser
The Cullen Frost Bankers's shares have fallen sharply since announcing third quarter results October 25th and indicating loan growth would likely be flat in the fourth quarter. We believe part of the flat loan growth stems from Cullen Frost Bankers's conservative lending policy. We think the company's funding makeup, which includes over 80% low-interest deposits, will help stabilize net interest margin in a difficult interest-rate environment. We are trimming our 2006 and 2007 EPS estimates by $0.01 and $0.06, respectively, to $3.45 and $3.69, but our target price remains $64, 17.3 times our 2007 EPS estimate, in line with historical levels.
Pacific Capital Bancorp (PCBC)
Cuts to 3 STARS (hold) from 4 STARS (buy)
Analyst: Stuart Plesser
Pacific Capital Bancorp's shares have risen almost 15% over the last two weeks, compared with a 1% decline for the S&P 500 Regional Bank Index. Following the rise, we believe the shares are now fairly valued. Although Pacific Capital Bancorp should benefit from ongoing expense reduction, we are wary of the shares of a company that derives over 50% of its net income from non-core tax refund loans. Our 2006 and 2007 EPS estimates remain $2.25 and $2.33, and we are keeping our 12-month target price at $32. At 14 times our 12-month forward EPS estimate of $2.29, this is a discount to peers.
Reiterates 2 STARS (sell) on ADRs
Analyst: Scott Kessler
Baidu.com posts quarterly earnings per ADS of 29 cents, after 6 cents for stock options and before 2 cents one-time tax benefit, vs. 3 cents one year earlier, 2 cents above our forecast. Revenues rose 169%, reflecting what we consider a robust Chinese advertising market and share gains in search. However, revenues were slightly below our projection. We are lowering our fourth-quarter forecasts modestly, based on uncertainty related to recent search-algorithm changes, and trimming our full 2006 earnings per ADS estimates to 95 cents from 96 cents. But, we are raising our 2007 estimate to $1.65 from $1.50 on our more favorable revenue outlook.
Dominion Resources (D)
Upgrades to 4 STARS (buy) from 3 STARS (hold)
Analyst: Christopher Muir
Third quarter operating EPS of $1.87, vs. $1.07 one year earlier, beats our $1.39 estimate. Energy, Generation, and Exploration & Production results exceeded our forecasts, as lower unrecovered Virginia fuel expenses and higher oil and gas production more than offset milder weather and less favorable oil and gas prices. Dominion announced it would pursue the sale of most of its E&P business and proceeds could be used to reduce debt or repurchase shares, which we view as favorable. Our 2006 and 2007 EPS estimates stay $5.17 and $6.18. We are raising our target price by $12 to $91, about in line with 2007 peer P-e ratios.
Maintains 5 STARS (strong buy)
Analyst: J. Peters, CFA
Excluding currency gains of 6 cents, Garmin posts third quarter EPS of 50 cents vs. 33 cents, in line with the Street forecast but a penny shy of our estimate. Revenues rose 62%, with automotive segment revenues more than doubling, marine revenues up 12%, and outdoor/fitness revenues up 22%. However, the shares are trading down 14% this morning, we believe on weakness in the aviation segment, where revenues fell 3%, and on investor disappointment that Garmin met rather than beat expectations as they have done in recent quarters. We will provide an update after the 11 am EST conference call.