S&P Keeps Hold on Dell Shares

Plus: Analyst opinions on Arrow Electronics and Becton Dickinson

Dell Inc. (DELL)

Reiterates 3 STARS (hold)

Analyst: Richard Stice, CFA

Dell announces that former AMR Corp. (AMR) CEO Don Carty will become CFO of the company on Jan. 1. Carty has been a member of Dell's board of directors since 1992. We are not surprised, given the ongoing formal SEC investigation, and we believe the appointment of Carty may provide additional stability. We are encouraged by Dell's October-quarter financial results and improving customer service metrics. But given uncertainty regarding the SEC probe, loss of share in the PC market and reduction in transparency, we would not add to existing positions. Our target price remains $28.

Arrow Electronics (ARW)

Upgrades to 4 STARS (buy) from 3 STARS (hold)

Analyst: J. Hingorani

We view the shares as attractively valued now, based on our expectation that recent acquisition transactions will be accretive to earnings in 2007. We believe Arrow has historically demonstrated an ability to close and integrate acquisitions effectively. We also believe its acquisition strategy has diversified its revenue base, with recent purchases addressing such diverse market segments as access, security, and displays for handheld devices. We are raising our target price to $37 from $33, which at 11.1 times our 2007 EPS estimate of $3.33 is in line with the historical average.

Becton Dickinson (BDX)

Maintains 4 STARS (buy)

Analyst: Robert Gold

Becton purchases the remaining stake in TriPath Imaging that it did not already own for $350 million in cash. We believe the deal is strategically sound, adding cervical cancer screening capabilities to Becton's product line, as well as an attractive diagnostic cancer test pipeline. Our fiscal 2007 (ending September) revenue forecast rises to $6.5 billion from $6.4 billion but our fiscal 2008 estimate remains $7.0 billion. We expect about 2 cents of dilution to cash EPS in fiscal 2007, however, our EPS estimate for the fiscal year falls by 5 cents to $3.70 and fiscal 2008's by 10 cents to $4.20, also incorporating lower margin assumptions in core business lines.

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