S&P DOWNGRADES RECOMMENDATION ON SHARES OF GOLDMAN SACHS TO HOLD FROM BUY
We believe that recent credit market disruptions continue to weigh on Goldman shares. Widening credit spreads have reduced M&A activities and debt-underwriting volume is likely down, reducing investment banking fees. We believe fees from asset management will decrease due to declining balances and fee reductions, and trading revenues, principal investments and equity underwriting will not likely be enough to offset weakness elsewhere. We are keeping our 2007 EPS estimate of $20.54, but cutting our target price by $15 to $185, 2.3 times a slightly lowered projected book value. /M. Albrecht
S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF MACY'S INC.
July-quarter operating EPS of 29 cents vs. 49 cents meets our estimate, as expense reductions offset margin pressure from markdowns taken on slow-selling apparel. Macy's says the performance gap between legacy and new Macy's doors is narrowing, which we find encouraging. But given our perceived merchandising risk for fall and a tough macro environment for consumers, we do not expect Macy's negative same-store sales trend to improve near term. We are reducing our fiscal 2008 (ending January) operating EPS estimate by 20 cents to $2.20. We are lowering our target price by $9 to $35 on revised peer p-e analysis. /J. Asaeda
S&P REITERATES HOLD OPINION ON SHARES OF DEERE
July-quarter EPS of $2.37 vs. $1.85 is well above our estimate, with strong foreign farm equipment demand and higher commercial and consumer equipment prices outweighing weakness in construction and forestry equipment. We are hiking our fiscal 2007 (ending October) EPS estimate by 50 cents to $7.50, and fiscal 2008's by 30 cents to $8.80. We see gains in farm equipment, on solid global economies and robust demand for renewable fuels, outweighing ongoing weakness in construction and forestry. We are raising our target price by $7 to $132, 15 times our fiscal 2008 EPS estimate, a traditional mid-cycle multiple for DE. /M. Jaffe
S&P REITERATES SELL RECOMMENDATION ON SHARES OF THORNBURG MORTGAGE
Thornburg announces it is delaying payment of its dividend, originally scheduled for Aug. 15, until Sept. 17, to give it time to manage through the current mortgage market turmoil. Thornburg has received and met all margin calls to date, but its book value has declined to $14.28 per share, from $19.38 at June 30. While we expect the stock may strengthen on the news that it has met all margin calls, we believe the growing uncertainty in the mortgage and credit markets, and the high leverage employed by Thornburg, pose the risks of further book value declines and liquidity issues. /J. Willey