S&P Ups Monster, Cuts General Mills

Plus: Analyst opinions on Bed Bath & Beyond, Boston Scientific, and more

Monster Worldwide (MNST)

Ups to 3 STARS (hold) from 1 STAR (strong sell)

Analyst: Mike Jaffe

Monster Worldwide's recent discovery of substantial options backdating between 1997 and 2003 makes us think it could have major corporate governance issues. However, the offending executives are no longer part of the company, and we have a favorable view of its operating prospects for coming years despite the cyclicality and competitive nature of its business. We still see $1.19 earnings per share (EPS) in 2006, but are increasing our 2007 EPS estimate by $0.15 to $1.55. We are raising our 12-month target price by $20 to $50, 32 times our 2007 estimate, a premium multiple based on our above-peer growth outlook for Monster Worldwide.

General Mills (GIS)

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

Analyst: Thomas Graves, CFA

November-quarter EPS of $1.08, vs. 97 cents one year earlier, tops our estimate by 6 cents. This year's quarter includes 2 cents of incremental stock-based compensation expense, and year-ago quarter had 5 cents dilution from contingently convertible debt. A nearly 100 basis-point improvement in segment operating margins largely offset a rise in corporate unallocated expense. We are raising our fiscal 2007 (May) EPS estimate to $3.15 from $3.10. Also, we are increasing our 12-month target price to $63 from $61, but do not see enough upside to advise new purchases. The stock has an indicated dividend yield of about 2.5%.

The Finish Line (FINL)

Cuts to 1 STAR (strong sell) from 2 STARS (sell)

Analyst: Mark Basham

Nov-Q $0.06 loss per share vs. year-ago $0.02 EPS is in line with our estimate and The Finish Line's early December guidance. Same-store performance deteriorated through the quarter, and holiday sales remain under pressure, causing significant store operating expense deleveraging. The Finish Line moved into a net borrowing position at Nov-Q end, with $47 million negative swing from year ago. We see inventories, up 5% per sq. ft., as 20% too heavy, given our February quarter outlook. We are cutting our fiscal year 2007 (Feb.) estimate by $0.02 to $0.68, and 2008's by $0.15 to $0.60. Our 12-month target price remains $9.

Commercial Metals (CMC)

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

Analyst: Leo Larkin

Commercial Metals posts Nov-Q EPS of $0.71 vs. $0.57, exceeding our $0.65 estimate. Sales rose 21%. Based on company guidance, we are reducing our February quarter EPS estimate to $0.61 from $0.68, which taken with the Nov-Q outperformance, results in no change to our fiscal year 2007 (Aug) EPS estimate of $3.12. We believe shares of Commercial Metals are attractive, currently selling at 8.1 times our fiscal year 2007 EPS estimate. Longer term, we believe Commercial Metals will benefit from consolidation of the global steel industry and a turnaround at its Polish mill. Our 12-month target price of $32 remains unchanged.

3Com (COMS)

Reiterates 3 STARS (hold)

Analyst: Ari Bensinger

Before special items, 3Com posts November-quarter EPS of 2 cents, vs. an 8-cent loss per share one year earlier, better than our one-cent loss estimate, on an 11% sequential sales increase to $333 million, which beat our $313 million forecast. We see improving momentum in 3Com's legacy networking business, particularly for security and VoIP products. However, we are disappointed with company guidance for flat sequential sales growth in the Huawei-3Com (H3C) segment over the next two quarters due to integration issues as 3Com buys the remaining 49% ownership stake in H3C. Based largely on sum-of-parts valuation, our target price remains $4.

Bed Bath & Beyond (BBBY)

Reiterates 5 STARS (strong buy)

Analyst: Michael Souers

The company posts November-quarter EPS of 50 cents, vs. 45 cents one year earlier, 3 cents shy of our estimate. The company incurred higher SG&A expenses, which we attribute largely to legal and accounting charges related to the company's review of former stock option practices. However, comparable-store sales growth of 4.6% bested our 4.0% projection, and we contend that the company continues to execute admirably in a challenging environment for home-related retailers. We are lowering our fiscal 2007 (Feb.) and fiscal 2008 EPS estimates to $2.14 and $2.40 from $2.19 and $2.50, respectively. However, our 12-month discounted cash-flow-based target price remains $47. /

Boston Scientific (BSX)

Reiterates 3 STARS (hold)

Analyst: Robert Gold

According to an unconfirmed report on CNBC, Boston Scientific has entered into a two-year deal under which it will be the exclusive provider of coronary stents to the Cleveland Clinic. In our view, this is a highly unusual situation and one that will likely cause some unrest among interventional cardiologists, who may prefer stents manufactured by Johnson & Johnson (JNJ). We think the deal likely includes significant unit price concessions and we do not anticipate any substantial incremental earnings contributions. We would hold the shares, but not add to positions.

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