S&P Downgrades Lennar to Sell

Plus: Analyst opinions on Wal-Mart, GE, Anheuser-Busch, Nabors Industries, and more

Lennar Corp. (LEN)

Cuts to 2 STARS (sell) from 3 STARS (hold)

Analyst: Thomas Smith, CFA

Lennar warns that November quarter EPS are apt to be $0.70 to $0.75. After giving effect to inventory write-offs and valuation adjustments of $400 to 500 million, we are cutting our estimate to a loss of $1.15 from EPS of $1.17. New orders fell 6% in the Nov. quarter, contributing to our more bearish outlook for fiscal year 2007 (ending Nov.). One bright sign we see in a dim picture is a new partner added to a key joint venture. We are lowering our EPS estimates to $3.78 from $6.05 for fiscal year 2006, and to $3.00 from $4.50 for fiscal year 2007. Our 12-month target price drops by $1 to $49, based on our updated book value estimate.

Wal-Mart Stores (WMT)

Reiterates 4 STARS (buy)

Analyst: Joseph Agnese

Wal-Mart estimates December comp-store sales rose 1.6%, above our 0.5% projection. We continue to expect near-term pressure on this metric from weaker apparel sales and difficult comps related to last year's hurricanes. However, we look for sales trends to improve in the spring, benefitting from newly remodeled stores, new merchandise offerings, and easing comparisons. We are keeping our Jan. quarter EPS estimate at $0.90, believing results should be driven by new store expansion and improved inventory control. Our 12-month target price remains $53.

Salesforce.com (CRM)

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

Analyst: Zaineb Bokhari

Shares have fallen nearly 18% from their 52-week high in mid-November, recently trading a bit below our target price of $37, which is 5.8 times the enterprise value/sales on our fiscal year 2008 (ending Jan.) sales estimate. We think shares are fairly valued at these levels. We expect Salesforce.com to remain the leader in the on-demand customer relationship management market, although we see traditional enterprise software vendors competing with alternatives in an effort to capitalize on strong on-demand growth prospects. We still see fiscal year 2007 breakeven and $0.11 EPS in fiscal year 2008, after projected option expense.

General Electric (GE)

Reiterates 4 STARS (buy)

Analyst: Richard Tortoriello

We are raising our target price to $45 from $40. We believe that continued global economic growth and liquidity will favor GE's infrastructure and commercial finance businesses. We also note significant improvement at NBC-Universal, which GE expects will finally show year-to-year growth in the 2006 fourth quarter. In addition, we believe GE is taking the right steps for shareholders, including dividend hikes, and significant share repurchases, resulting in share count reductions. Our new target is based on a p-e of 20 times our 2007 EPS estimate of $2.25, below GE's 10-year average of 23 times.

Anheuser-Busch (BUD)

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

Analyst: Raymond Mathis

We are encouraged by recent retail data indicating strengthening volume and pricing trends for Anheuser's domestic brands, and continued growth for its equity partners Modelo and Tsingtao. In addition, the agreement to import InBev brands in the first quarter should enhance volumes, better leveraging fixed costs. We believe Anheuser's more aggressive leverage target will allow the company to grow revenue through acquisitions, and boost EPS through additional share repurchases. We are raising our 2007 EPS estimate by 20 cents, to $2.80, and our 12-month target price by $3 to $54, based on our p-e analysis.

Nabors Industries (NBR)

Maintains 4 STARS (buy)

Analyst: Stewart Glickman

Nabors warns that fourth-quarter EPS will likely be in a range of 95 cents to $1.00, well below our $1.22 estimate, citing lower-than-expected activity levels in its North American gas-related markets, as well as delivery slippage of new land rigs. We have reduced our expectations for dayrate and margin growth in the Lower 48 and in Canada, but we still view the International segment as likely to generate strong growth in 2007. We are cutting our fourth-quarter EPS estimate to 99 cents from $1.22, and 2007's to $4.75 from $4.91. Based on discounted cash-flow and relative metrics, our 12-month target price drops $2 to $39.

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