S&P Keeps Hold on Agilent

Analyst Megan Graham-Hackett views the company's plan to sell its chip unit as positive. Plus, analysts' opinions on Dow Jones, Autodesk, and more

Agilent Technologies (A ): Reiterates 3 STARS (hold)

Analyst: Megan Graham-Hackett

Update: Agilent's July-quarter earnings per share of 28 cents, vs. 30 cents met our estimate. But revenue was 4% shy of our model and we are cutting our fiscal year 2005 (October) EPS estimate by 3 cents to $1.04. We view Agilent's plan to sell its semiconductor unit to Kohlberg Kravis and Silver Lake Partners for $2.66 billion as positive, and have long felt Agilent would benefit from a less diversified product portfolio. We are upping our 12-month target price to $32 from $27, based on our revised price/sales analysis, since we think better focus and growth prospects warrant a wider multiple, and see Agilent's $4 billion share buyback plan reducing share count.

Dow Jones & Co. (DJ ): Maintains 1 STAR (strong sell)

Analysts: James Peters, CFA, Gary McDaniel

The shares are up 8% today on an unconfirmed Reuters report indicating members of the Bancroft family are interested in a sale of the firm. We note that such speculation have surfaced in the past and that the family recently negotiated a reduction in the number of shares it must own to maintain control, which we believe indicates the family intends to maintain control. The shares are trading at 28.9 times our 2006 EPS estimate of $1.39, up from 26.7 times at Friday's close. This compares to an average for the large newspaper peer group of 18.7 times at Friday's close. Our target price is $33.

Lowe's (LOW ): Reiterates 3 STARS (hold)

Analyst: Michael Souers

Lowe's posts July-quarter earnings per share of $1.05, vs. 89 cents, 2 cents better than our estimate and 3 cents higher than the Street's. Particularly impressive to us was the 6.5% increase in same-store-sales, driven by several initiatives, well ahead of our 4.5% estimate. We believe a strong impending hurricane season will help boost October-quarter results but we remain concerned over a potential slowdown in the housing market. We are raising our fiscal year 2006 (January) and fiscal year 2007 EPS estimates to $3.35 and $3.86, respectively, from $3.31 and $3.84. Our 12-month target price remains $70, or about 18 times our fiscal year 2007 EPS estimate.

Autodesk (ADSK ): Reiterates 3 STARS (hold)

Analyst: Jonathan Rudy, CFA

Autodesk is scheduled to report July-quarter results on Aug. 18 after the close. We estimate operating earnings per share of 25 cents, up from year-ago 17 cents and 25% revenue growth to about $349.5 million. Based on our expectation of solid cost controls, we see Autodesk's operating margin widening to 22% from year-ago 19%. With strong recent company execution, in our view, about $538 million in cash/investments, and no debt, we would hold Autodesk. However, with its shares trading at a premium to peers on ratios of p-e to growth and enterprise value to sales, we would not add to positions.

AutoNation (AN ): Reiterates 2 STARS (sell)

Analyst: Efraim Levy, CFA

Recent results were better than expected, we believe a reflection of programs from the Big Three domestic brands offering employee pricing for all customers. With interest rates rising, we expect interest costs of floorplan inventory financing to rise. We are increasing our 2005 earnings per share estimate by 3 cents, to $1.48, and initiating 2006's at $1.59. AutoNation is trading above peers on a p-e basis. Based on our updated p-e and discounted cash flow analyses, we are raising our 12-month month target price to $20, from $18. We continue to view the shares as overvalued.

BP Plc (BP ): Reiterates 4 STARS (buy)

Analyst: Tina Vital

We view BP's upstream production and reserve replacement track record as strong. Despite delays at its Thunder Horse platform, we see 2005 growth near 4%. With strong cash flow, the company raised its quarterly dividend by 26% and it expects share buybacks of $6 billion in the second half of 2005, from $4.1 billion in the first half. Using our higher price and margin forecast, our 2005 earnings/ADS estimate rises by 24 cents to $5.99, 2006's by 28 cents to $5.95, 2007's by 29 cents to $6.38; and our target price by $7 to $80, an enterprise value of 8 times 2005 estimated EBITDA, above peers, reflecting our view of above-average prospects.

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