S&P Picks and Pans: Bear Stearns, Altria, Pfizer, Pulte

Analyst opinions on stocks making headlines Wednesday

Bear Stearns Cos. (BSC; $139.91)

Reiterates 3 STARS (hold)

Analyst: Matthew Albrecht

According to an unconfirmed report in the Wall Street Journal, the firm has revealed that two leveraged hedge funds run by its asset management unit have lost most of their value. We believe Bear's previously disclosed lending commitment to one of the funds remains fully collateralized. The largest risk to Bear's bottom line, in our opinion, is the slowdown in mortgage originations and securitizations that may result, reducing fee income. At this time, however, we are keeping our fiscal 2007 (November) EPS estimate at $14.59, and our 12-month target price at $157, 10.8 times that estimate.

Altria Group (MO; $70.29)

Reiterates 5 STARS (strong buy)

Analyst: Raymond Mathis

Excluding previously announced restructuring charges for the transfer of manufacturing to European facilities, Altria reports second quarter EPS of $1.15 vs. $1.05, in line with our estimate and 2 cents ahead of Street. Results benefited from domestic market-share gains, and international volume growth. We look for line extensions and new product introductions to continue to drive the top line, with manufacturing efficiencies likely to boost results in 2008 and beyond. This supports our 2007 operating EPS estimate of $4.25, and our sum-of-the-parts-derived 12-month target price of $85.

Pfizer (PFE; $25.18)

Reiterates 3 STARS (hold)

Analyst: Herman Saftlas

Impacted by exclusivity losses on Zoloft and Norvasc, as well as by weaker Lipitor sales, second quarter adjusted EPS sank 16% to 42 cents, 8 cents below our forecast. U.S. sales of Lipitor, Pfizer's largest-selling drug, dropped 25%, reflecting changes in wholesaler inventories, and competitive pressures. Despite the disappointing second quarter, Pfizer reaffirms EPS guidance of $2.08-$2.15 for full 2007 and $2.31-$2.45 for 2008, supported by aggressive cost cutting and share buybacks. We are keeping our 12-month target price of $28, a discount-to-peers 12 times $2.33 EPS we see in 2008. Dividend yield is 4.6%.

Pulte Homes (PHM; $22.45)

Downgrades to 1 STAR (strong sell) from 2 STARS (sell)

Analyst: Thomas Smith, CFA

Pulte warns that second quarter loss per share is likely to be $2.00-$2.10, including impairment and other charges of over $740 million pretax, compared with a loss per share we had expected at 18 cents. Home closings fell 40% and average selling price per home dipped 4%. These are among the largest writedowns we have seen in the current homebuilding industry slump. We are widening our 2007 loss estimate to $2.20 from 11 cents, and lowering our 2008 EPS estimate to 80 cents from $1.00. We are lowering our 12-month target price to $16 from $20 based on updated price-to-book analysis.

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