S&P Lifts Apple Estimate, Target Price

Plus: Analysts cut eBay's target price, lower estimates on Intel, upgrade Honeywell, and more

From Standard & Poor's Equity Research

Apple Computer (AAPL) : Reiterates 5 STARS (strong buy)

Analyst: Richard Stice, CFA

June quarter earnings per share (EPS) of 54 cents vs. 37 cents is 14 cents above our estimate. Sales also exceeded our forecast, rising 24%. We are encouraged by 12% unit growth for Macs, which we think indicates marketshare gains. We view iPod unit growth of 32% as solid and believe the segment will benefit from expected new offerings later this year. We are raising our fiscal year 2006 (ending September) earnings per share (EPS) estimate by 15 cents to $2.12, and our 12-month target price by $3 to $75. With its market position, improving PC sales, and a balance sheet with over $10 per share in net cash and short-term investments, we strongly advise purchase.

eBay (EBAY) : Reiterates 5 STARS (strong buy)

Analyst: Scott Kessler

Posts second quarter EPS of 20 cents (after 4 cents stock compensation expense, but before items) vs. the year ago's reported 22 cents. This is a penny below our forecast, largely due to higher stock option expense than we expected. Revenue rose 30%, slightly above our forecast. Our EPS estimates for 2006 and 2007 stay at 84 cents and $1.08. However, we are reducing our target price to $39 from $48. We see eBay seizing upon advertising opportunities with Yahoo (YHOO) and AdContext. The announced $2 billion buyback and management's confidence were positives.

Intel (INTC) : Reiterates 2 STARS (sell)

Analyst: Thomas Smith, CFA

Intel reports second quarter EPS of 15 cents vs. 33 cents, a penny above our estimate. Revenue declined 13% year over year and 10% quarter over quarter, well below the overall semiconductor industry pace, as processor unit sales and average selling prices fell. Gross margin was 3% above our estimate but guidance for the second half of 2006 is substantially lower than our model. New products, staff reductions and a pending communication unit sale should help long-term, but a 21% quarter over quarter inventory rise should impede near-term progress, in our view. We are lowering our EPS estimates to 75 cents from 90 cents for 2006 and to $1.05 from $1.30 for 2007.

Honeywell (HON) : Ups to 3 STARS (hold) from 2 STARS (sell)

Analyst: Richard Tortoriello

Second quarter EPS of 63 cents vs. adjusted EPS of 51 cents is 3 cents above our estimate on a 12% rise in sales. Results were driven by 11% organic growth in Honeywell's specialty materials segment and 9% growth in automation/control systems. Going forward, we also expect a pickup in aerospace, where we see a strong market, and growth in transportation on sales of turbocharger-related products. We are raising our 2006 EPS estimate to $2.50 from $2.45 and 2007's to $2.90 from $2.87. Our 12-month target price rises $5 to $42, 14.5 times our 2007 estimate.

Cypress Semiconductor (CY) : Ups to 4 STARS (buy) from 3 STARS (hold)

Analyst: Thomas Smith, CFA

Cypress Semiconductor posts second quarter earnings per share (EPS) of 4 cents vs. a loss per share of 12 cents, exceeding our estimate by 2 cents. Revenues rose 20% from a year ago and 6% from the first quarter. We believe Cypress Semiconductor is enjoying good demand and pricing power with several new products in solar cell, SRAM, and USB areas. We are raising our GAAP EPS estimates to 27 cents from 17 cents for 2006, and to 50 cents from 35 cents for 2007. We believe the shares ought to trade up to the middle of their recent historical range on price-to-sales. Our 12-month target price remains $19.

Johnson Controls (JCI) : Ups to 4 STARS (buy) from 3 STARS (hold)

Analyst: Efraim Levy, CFA

Johnson Controls posts adjusted June quarter EPS of $1.68 vs. $1.31, in line with expectations. Its shares are sharply lower today as the company cut the upper end of its fiscal year 2006 (ending Sept.) earnings guidance by a nickel, to $5.25-$5.30. While we understand concern about vulnerability in the automotive seating business, we think sellers are overreacting. We are trimming our fiscal year 2006 (ending Sept.) estimate by 2 cents to $5.30 but keeping fiscal year 2007's at $6.18. Although we are lowering our 12-month target price by $1 to $80, we would use today's price drop to buy Johnson Controls shares, yielding 1.6%, for total return.

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