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S&P Keeps Strong Sell on LG Philips

Plus: Analyst opinions on DuPont, Mirant and more

S&P Keeps Strong Sell on LG Philips

Plus: Analyst opinions on DuPont, Mirant and more

LG Philips (LPL)

Reiterates 1 STARS (strong sell)

Analysts: K. Leon, CPA, T. Rosenbluth

LG Philips announces that on Friday officials from the Korean Fair Trade Commission and the U.S. Department of Justice began investigating the company regarding potentially anti-competitive conduct in the liquified crystal display market (LCD). We will monitor this development closely and we believe that the company's flat panel display business was already under strong pricing pressure, with an unfavorable product and customer mix. In our opinion, the company will not be profitable in 2006 or 2007. Based on an enterprise value/EBITDA estimate below peers, our 12-month target price remains $14.

DuPont (DD)

Maintains 3 STARS (hold)

Analyst: R. O'Reilly-CFA

The company's plan to shift investment to its seed genetics business from the pesticide and nutrition units reflects opportunities in new seed hybrids. The company has lost corn market share in N. America over the past several years and has lagged in the introduction of triple stacks corn hybrids. DuPont claims superior results for its Herculex product, which will be launched over the next 2 years. The company now estimates that reported 2006 EPS will include about 40 cents of non-recurring gains, mainly from favorable tax settlements. Our operating EPS estimates remain $2.85 for 2006 and $3.10 for 2007.

Mirant Corp. (MIR)

Maintains 3 STARS (hold)

Analyst: Christopher Muir

Mirant agrees to sell its Philippine business for an expected purchase price of $3.79 billion. The sale is expected to generate a pretax $2.2 billion gain and close in the second quarter of 2007, pending certain conditions. The company plans to repay $642 million in related debt and to use the remaining proceeds for stock repurchases. We are raising our 12-month target price by $5 to $36, as we believe the announced transaction removes uncertainty surrounding the sale of the business and will provide substantial liquidity, allowing for an acceleration of share repurchases.

HSBC Holdings (HBC)

Reiterates 3 STARS (hold)

Analyst: Derek Chambers

HSBC's recent trading update indicated some short-term problems in its widely diversified portfolio. We believe, however, that HSBC continues to generate growth in many areas, helped by its well-developed distribution platform. We are lowering our 2006 earnings per ADS estimate to $7.30 from $7.70, and 2007's to $8.30 from $8.55. However, our 12-month target price rises by $3 to $99, due to the recent weakening of the U.S. dollar, at an exchange rate of GBP 1/ $1.89. Our valuation is based on our DCF model, which assumes a 9% medium-term volume growth and a 10% cost of equity.

Harsco Corp. (HSC)

Maintains 4 STARS (buy)

Analyst: Kevin Kirkeby, CFA

Harsco emphasizes its role as a services provider at investor meeting, and guides for 12% to 14% earnings growth in 2007. We view Harsco as well positioned to benefit from likely continuation in non-residential construction spending, as well as a further outsourcing of non-core activities by steel mills. Our 2006 EPS estimate stays at $4.50, but we are raising 2007's by $0.06 to $5.08, largely to reflect increased opportunities we see in Harsco's non-U.S. markets. We are raising our target price by $2 to $92 based on forward price-to-earnings valuation of 18 times, a modest premium to Harsco's historical average.

PMI Group (PMI)

Reiterates 5 STARS (strong buy)

Analyst: S. Plesser

For the first time, premiums on private and government mortgage insurance will become tax deductible next year for some borrowers under legislation passed by the U.S. Congress. This should add to the attractiveness of mortgage insurance vis-a-vis piggy back loans, especially considering the sharp rise in short-term interest rates. Our 2006 and 2007 EPS estimates remain $4.61 and $5.06, respectively. We are maintaining our 12-month target price of $54, 1.25 times our 12-month forward book value estimate of $43.55, in line with the historical average.