S&P Keeps Hold on DaimlerChrysler

EOG Resources and Genzyme get upgraded, plus analysts' opinions on ExxonMobil, Martha Stewart Living, and Starbucks

DaimlerChrysler (DCX ): Reiterates 3 STARS (hold)

Analyst: Yannick Mathieu

DaimlerChrysler posts second-quarter earnings per share of €0.73 (88 cents), above our €0.63 estimate, as each unit beat our expectations. We view Dieter Zetsche's succession of Juergen Schrempp as CEO as positive, as we credit Zetsche for turning around the Chrysler Group. Due to better-than-expected results, we are increasing our 2005 EPS estimate to $3.20 from $3.03 and our 2006 EPS forecast to $4.25 from $3.85. Based primarily on our discounted cash flow model, we are raising our 12-month target price to $48 from $43.

ExxonMobil (XOM ): Reiterates 5 STARS (strong buy)

Analyst: Tina Vital

ExxonMobil posts second-quarter operating earnings of $1.23, vs. 88 cents. Results are 3 cents below our estimate on lower-than-expected upstream production and chemical volume sales, despite stronger refining throughputs and margins. While oil and gas production dropped 4.3%, ExxonMobil expects improved second half 2005 volumes, and we continue to project flat full year 2005 production with an increase of about 3% a year in 2006 and beyond. Upwardly revised oil and gas price forecast leads us to raise our 2005 EPS estimate by 22 cents to $4.92, and 2006's by 23 cents to $4.89, but we are trimming 2007's by 7 cents to $3.90.

Genzyme (GENZ ): Upgrades to 5 STARS (strong buy) from 4 STARS (buy)

Analyst: Frank DiLorenzo-CFA

Genzyme announces positive results for Renagel from DCOR trial in over 2,100 patients. Importantly, in our view, the high-risk patient subset of 65 years and older showed statistically significant reduction in mortality. We still see 2005 Renagel sales of $419 million, but are raising our 2006 projection to $520 million from $462 million. We see 2005 EPS of $2.22, and our 2006 estimate rises to $2.77 from $2.70. Assuming Genzyme trades to p-e-to-growth of 1.5 times our 2006 estimate -- which we see as justified by a 21.2% EPS growth rate, predictability, and diverse portfolio -- our target price rises to $88 from $77.

EOG Resources (EOG ): Upgrading to 4 STARS (buy) from 3 STARS (hold)

Analyst: Charles LaPorta

EOG posts second-quarter earnings per share of 98 cents, vs. 52 cents, below our $1.00 estimate. Year-over-year production growth was 20%, all of it organic. The company raised its 2005 volume growth expectation to 15.5% from 14%; its 2006 growth expectation is 8%. Hydrocarbon prices realizations were strong; we believe EOG is maximizing its price leverage, as it currently has no hedges on. We are raising our 2005 EPS estimate from $3.75 to $4.55. Our 12-month target price also increases by $20 to $72, reflecting premium valuations of 15.8 times our 2005 EPS estimate and an enterprise value of 6.7 times estimated EBITDA.

Martha Stewart Living (MSO ): Reiterates 1 STAR (strong sell)

Analyst: Gary McDaniel

After yesterday's call, we are widening our third-quarter loss per share estimate by 14 cents to 22 cents and cutting our fourth-quarter earnings per share estimate by 4 cents to 12 cents. Our 2005 loss estimate widens to $1.20 from 74 cents, with 16 cents of the difference attributable to moving up vesting of one-third of warrants issued to Mark Burnett to the second half of 2005 from 2006. Our 2006 EPS estimate of 24 cents assumes publishing revenue growth of 30% and operating margin of 15%; TV revenues of $52.5 million and margin of 6.5%, before Burnett's warrants; and 5% growth in merchandising revenues and margin of 66%. Our discounted cash flow-based target price stays at $17.

Starbucks (SBUX ): Reiterates 3 STARS (hold)

Analyst: Dennis Milton

June-quarter earnings per share of 31 cents, vs. 24 cents, is 2 cents above our estimate. Results benefited from brisk expansion, menu price hikes, and improved performance of joint ventures. We are raising our fiscal year 2005 (September) EPS estimate by 4 cents, to $1.20, fiscal year 2006's EPS by 3 cents, to $1.50, and boosting our 12-month target price by $2 to $56 to reflect accelerated store openings and improved operations. At 39 times our calendar 2005 EPS estimate of $1.30, the shares trade at a lofty premium to the S&P 500. We believe this premium is justified by Starbucks' strong growth prospects and history of successful product innovation.

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