S&P: Still Hold Lexmark after Profit Warning

Plus comments on Martin Marietta Materials and Amsurg

UPDATE - Lexmark (LXK ) : Reiterates 3 STARS (hold) Opinion

Analyst: Megan Graham-Hackett

The company's preannounced third quarter earnings per share shortfall of 40 cents to 50 cents, compared with the $1.01 we expected, appears to reflect inventory reductions in its laser and inkjet printer supplies channel, and weak demand. We think market share losses in Lexmark's branded business over the last few quarters is a factor in its supplies shortfall, and we expect aggressive pricing to move these units. We are cutting our 2005 earnings per share estimate by 81 cents to $3.50. Though we are reducing our target price by $19 to $53 on new price/sales and p-e analyses, we think cash position, buybacks, and price/sales below peers make Lexmark worth holding.

Business Objects(BOBJ ): Reiterates 3 STARS (hold)

Analyst: Z. Bokhari

The company agreed to acquire Infommersion, a private provider of information visualization software, for about $40 million cash, subject to approvals. The deal is expected to close in the fourth quatrter and be accretive to earnings in 2006. We believe Business Objects will continue to acquire point-solution vendors to fill out its product portfolio. We are boosting our 2006 per ADS estimate by $0.05, to $1.41, largely on expected contribution from recent acquisition of SRC Software. Our 12-month target price rises $4 to $37, applying a 1.8 p-e-to-growth to our new 2006 estimate, within historical average for the shares.

Martin Marietta Materials (MLM ) : Reiterates 3 STARS (hold)

Analyst: Leo Larkin

Martin Marietta Materials preannounced third quarter earnings per share of $1.61 to $1.66, including an unusual gain of 17 cents, higher than its prior guidance of $1.20 to $1.35. The company said that better-than-expected pricing, volume and cost controls more than offset the impact of Hurricanes Katrina and Rita, and raised its guidance for full 2005 earnings per share to $3.80 to $3.95 from $3.35 to $3.55. Consequently, we are increasing our 2005 earnings per share estimate to $3.95 from $3.75, and our 2006 estimate to $4.35 from $4.05. In addition, our 12-month target price rises to $90 from $80, to reflect new earnings per share forecasts.

Amsurg (AMSG ) : Maintains 3 STARS (hold)

Analyst: Cameron Lavey

Amsurg sees third quarter earnings per share of 30 cents, 5 cents below our estimate, on same-center revenue growth of 4%. The company cites 16 underperforming centers that experienced higher-than-normal departures of physicians and lower procedure volumes. While we think these issues are likely short term in nature, we remain sonewhat cautious on the shares as Amsurg's same-center revenue and volume growth have underperformed peers. We are lowering our 2005 earnings per share estimates by 11 cents to $1.24 and 2006's by 5 cents to $1.40, after a 10 cents option expense. Our target price falls by $2 to $28 on our view of lower free cash flow.

FPL Group (FPL ) : Ups to 4 STARS (buy) from 3 STARS (hold)

Analyst: Justin McCann

In light of our improved earnings outlook for FPL's independent power unit, we are raising our 2006 earnings per share estimate by 17 cents to $2.87, and 2007's by 25 cents to $3.30. We see the FPL Energy unit, which has a roughly 40% market share of the wind-power market, benefiting from higher power prices, as expiring contracts are being renewed at higher margins. We also see Florida Power & Light utility unit aided by rate certainty through 2009 and annual customer growth of 3% to 4%. Our 12-month target price rises $11, to $54, based on an above-peer p-e of 16.4 times on our 2007 estimate.

TCF Financial (TCB ) : Ups to 4 STARS (buy) from 3 STARS (hold)

Analyst: Jason Seo, CFA

TCF shares are down almost 17% year to date, which we believe is partly due to the company's credit exposure to bankrupt Delta Air Lines (DAL ). We view the shares' recent underperformance as a good buying opportunity, given our favorable view of the company's stable net interest margins despite continued increases in funding costs, as well as its strong base of non-interest-bearing deposits, diversified balance sheet and successful execution of de novo expansion, in both traditional and nontraditional branches. Our 12-month target price remains $30.

Nu Skin Enterprises (NUS ) : Cuts to 3 STARS (hold) from 4 STARS (buy)

Analyst: Howard Choe

Nu Skin Enterprises lowered its revenue forecast for 2005. We are not surprised by weak U.S. trends but are disappointed by the company's Japanese results, given the uptick in consumer spending there, and also by the adverse impact of new industry rules on Chinese sales reps. We are lowering our 2005 earnings per share estimate to $1.09 from $1.25, and 2006's to $1.22 from $1.40. Our target price falls to $18 from $27, which assumes a below-peer 14.8 times forward p-e. With limited visibility for the company's key growth market of Mainland China, we see Nu Skin as a market performer, fairly valued below peers now at a 14.5 times p-e.

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