S&P Downgrades T. Rowe Price

Analyst Stuart Plesser notes the stock's valuation. Plus: analysts comment on Dell's battery pack recall, upgrade Lear, and more

From Standard & Poor's Equity Research

T.Rowe Price (TROW) : Cuts to 4 STARS (buy) from 5 STARS (strong buy)

Analyst: Stuart Plesser

T.Rowe Price continues to have what we view as a formidable competitive advantage to its peer group of asset managers. But because of its strong relative investment performance and brand awareness, we are downgrading its shares based on valuation. The shares have risen 18% since the firm's June quarter release. Our 12-month target price remains $49.

Lear (LEA) : Ups to 3 STARS (hold) from 2 STARS (sell)

Analyst: Efraim Levy, CFA

Following the recent price decline, Lear shares now trade below our 12-month target price of $22. Our target price is less than 11 times our 2007 EPS estimate of $2.09 and reflects historical and peer comparative analyses. Despite Lear's exposure to struggling U.S. automakers General Motors (GM) and Ford (F) and other near-term challenges, we expect the company's earnings to rebound in 2007, based on benefits we anticipate from current restructuring activities.

Tele Norte Celular Participacoes (TCN) : Ups to 3 STARS (hold) from 2 STARS (sell)

Analyst: Kenneth Leon, CPA

After review of the second quarter, we think Tele Norte Celular Participacoes showed improvement, with 21,001 net new prepaid subscribers against a decline of 3,549 postpaids. At June 30, Tele Norte Celular Participacoes had a subscriber base of 1.2 million (80% prepaid, 20% postpaid). Second quarter postpaid churn remained 25%, same as the first quarter, while prepaid narrowed to 40% from 46%. We see EBITDA margins at 22% to 23% in 2006. Our 2006 loss estimate remains 90 cents. But we are widening our 2007 forecast to a loss of 40 cents from a loss of a penny. Share price at 1.7 times our 2007 sales estimate is below peers. We are raising our target price by 50 cents to $8 based on 2 times our 2006 sales estimate, near peers.

CA (CA) : Ups to 3 STARS (hold) from 2 STARS (sell)

Analyst: Zaineb Bokhari

June quarter operating earnings per share (EPS) of 17 cents vs. 22 cents is 5 cents above our estimate, as revenue grew 3% to $956 million, exceeding our $935 million estimate. Despite the revenue outperformance, we still forecast 3% revenue growth for full fiscal year 2007 (ending Mar.) CA intends to cut headcount by 1,700 (about 11%), and expects $200 million in annual cost savings. It also plans a $2 billion stock buyback, partly financed by bank debt. While details regarding the timing of these steps are not clear, we are raising our fiscal year 2007 EPS estimate to 95 cents from 86 cents. And our 12-month target price rises $5 to $24, 25 times our revised fiscal year 2007 estimate.

Dell (DELL) : Reiterates 3 STARS (hold)

Analyst: Richard Stice, CFA

Shares are down 1% in pre-market trading as Dell announces the voluntary recall of up to 4.1 million Sony (SNE) manufactured battery packs used in its notebook computers. Dell does not expect the recall to have a negative material impact on its operations. In our view, the announcement demonstrates ongoing execution difficulties at the company. Still, given its leading market position and our view of an advantageous financial structure, with over $4.50 per share in net cash and investments, we advise holding existing positions. Our 12-month target price is $23.

Amdocs (DOX) : Reiterates 5 STARS (strong buy)

Analyst: Todd Rosenbluth

Following Amdocs's completed acquisition of Cramer Systems Group, we are adjusting our fiscal year 2006 (ending Sept.) and fiscal year 2007 estimates. For fiscal year 2006, we are boosing our EPS estimate by 2 cents to $1.68 to reflect our expectation of wider gross margin in the Sept. quarter. Our fiscal year 2007 EPS estimate falls a penny to $1.96 as investment income offsets our higher revenue forecast. We believe that with the addition of Cramer, Amdocs will be able to gain market share in serving both the front and back office needs of large telecom carrier customers. Our 12-month target price remains $44.

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