S&P Lifts Corning, General Dynamics to Buy
Corning (GLW): Upgrades to 4 STARS (buy) from 3 STARS (hold)
Analyst: Kenneth Leon, CPA
After further review, including retail store channel checks, we believe Corning will benefit from a strong holiday season and January for flat panel display TVs, as the leading supplier of flat panel glass substrates. In our opinion, Corning will recognize higher unit volume shipments, with top 3 customers Samsung, Sharp and Sony (SNE) gaining market share. While Corning's telecom unit will show weaker fourth quarter sales vs. the third, we believe demand for fiber to the premise equipment will recover in 2007. Priced at 20 times our 2007 EPS estimate, just above peers, we maintain our $25 target price on the stock.
General Dynamics (GD): Upgrades to 4 STARS (buy) from 3 STARS (hold)
Analyst: Richard Tortoriello
Given the recent pullback, we see GD shares as attractive. We expect strong growth from the Combat Systems segment, which makes tanks, armored vehicles and munitions, due to the ongoing conflict in Iraq and the need for equipment replacement. We also see strength in Gulfstream and defense electronics, and improvement in ships. Our 2007 EPS estimate remains $4.75 but our 12-month target price rises by $2 to $82, or 17.3 times our 2007 EPS estimate. This represents a premium to the stock's 10-year historical average p-e of 15.2 times due to our projections of strong earnings growth.
Yahoo (YHOO): Reiterates 3 STARS (hold)
Analyst: Scott Kessler
Yahoo announces a broad partnership with a consortium of over 150 U.S. newspapers whereby its technology will help sell advertising and power search functionality on the newspapers' websites. Yahoo content and applications, such as maps and local listings, will also be provided. Newspaper content will be distributed via Yahoo offerings, including search and news. We view this as significant win for the company, which should contribute to market share, mind share and revenue. Also, the deal is with so-called "old media," a constituency we think is becoming increasingly important to Yahoo.
Xerox (XRX): Reiterates 3 STARS (hold)
Analyst: Richard Stice, CFA
At today's analyst meeting, Xerox described its longer-term strategic initiatives, including driving growth in color-related products and services and strengthening its annuity stream of business. We are encouraged with the company's overall market opportunity, portfolio of offerings and improving financial condition. But given our view of limited near-term revenue growth, and with the shares trading at premium to the S&P 500 based on our 2007 EPS estimate of $1.12, we would not add to existing positions at this time. Our 12-month target price remains $17.
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