Maintains 4 STARS (buy)
Analyst: Zaineb Bokhari
Oracle agrees to acquire Stellant (STEL), a provider of enterprise content management (ECM) software for $13.50 a share in cash, or $440 million, subject to approvals and conditions. The purchase price, a 27% premium over Stellant's previous closing price, values the company at about 3.5 times price-to-trailing 12-month sales. The transaction, expected to close by the end of calendar 2006 or early 2007, should allow Oracle to quickly acquire market share in the consolidating ECM space. We are keeping our EPS estimates of 93 cents for fiscal 2007 (ending May) and $1.06 for fiscal 2008. Our target price stays $22.
Matsushita Electric Industrial (MC)
Maintains 5 STARS (strong buy) on ADRs
Analyst: John Yang
The company posted September-quarter earnings per ADR of 30 cents, vs. 11 cents one year earlier, is in line with our estimate, paced by double-digit growth in the PDP TV and digital still cameras businesses. With its market leading position in PDP TV, we view Matsushita's full-year shipment target of 4 million units as realistic. Also, the company's proactive cost reduction in the PDP TV business should offset projected double-digit price decline in the flat panel TV space, in our view. Our fiscal 2007 (ending March) and fiscal 2008 earnings estimates remain 78 cents and 90 cents, respectively. Our 12-month target price stays $31, on an historical peak price-to-book ratio of 2X.
Medco Health Solutions (MHS)
Maintains 3 STARS (hold)
Analyst: Phillip Seligman
Third quarter operating EPS of 69 cents, vs. 57 cents one year earlier, before amortization, is 4 cents below our estimate on lower-than-expected revenue. We are encouraged by EBITDA margin rising and new business wins, but we still see risk of a modest negative EBITDA impact from a proposed wholesale drug price drop. Seeing no change from recent p-e, our target price drops $2 to $61, based on our 2007 EPS estimate of $3.12, raised today from $3.10. We see the planned Caremark (CMX)-CVS (CVS) merger, pending approvals, creating a stronger rival and possibly causing Medco to consider a similar move.