S&P Picks and Pans: Expedia, Monsanto, Adobe, Harris

Analyst opinions on stocks making headlines Friday

Expedia (EXPE; $26.51)

Reiterates 3 STARS (hold)

Analyst: Scott Kessler

Expedia is up more than 8% this morning, following an unconfirmed report from Bloomberg indicating Chairman Barry Diller might take the company private at $30 per share. Bloomberg speculates the acquisition plan consists of spinning off TripAdvisor and cutting 400 jobs. We believe this is plausible. As of March, Diller owned 27% of the shares and controlled 58% of the votes. We also think TripAdvisor has become Expedia's crown jewel; the flagship website attracts 20 million monthly visitors and has 6 million registered users. Also, today TripAdvisor announced new social-networking features.

Monsanto (MON; $66.33)

Maintains 3 STARS (hold)

Analyst: Kevin Kirkeby, CFA

Shares are up 4% this morning as Monsanto indicates May-quarter EPS will be around $1.00, compared with the Street's 76 cents view, and raises its fiscal 2007 (Aug.) guidance to $1.75-$1.80 from $1.60-$1.65. We are increasing our fiscal 2007 EPS estimate by 13 cents to $1.80 and fiscal 2008's by 20 cents to $2.11 as we see sales in corn seeds/traits and herbicides staying strong. Monsanto expects its recent Delta and Pine Land acquisition, before likely charges for Stoneville divestiture and related write-downs, to be a mild drag on August-quarter EPS. We raise our target price by $5 to $71 on revised discounted cash-flow and relative valuations.

Adobe Systems (ADBE; $43.96)

Maintains 3 STARS (hold)

Analyst: Zaineb Bokhari

May-quarter operating EPS of 33 cents vs. 28 cents is in line with our view. Revenues grew 17% to $745 million, $23 million above our forecast, helped by favorable market reception for recently launched Creative Suite 3 and by foreign exchange movements. Based on recent results and our outlook for a strong upgrade cycle for CS3, we are raising our fiscal 2007 (Nov.) revenue growth outlook to 17% from 14%, our EPS estimate by 2 cents to $1.35, and our fiscal 2008 EPS estimate by 3 cents to $1.58 (both after 14 cents option expense). We are lifting our target price by $5 to $48, on a blend of relative and intrinsic valuation metrics.

Harris Corp. (HRS; $52.82)

Reiterates 5 STARS (strong buy)

Analyst: Todd Rosenbluth

Harris today closed its acquisition of privately owned Multimax, a supplier of network infrastructure to government agencies, for $400 million in cash. This is earlier than we expected, and we are raising our fiscal 2008 (June) EPS estimate by 10 cents, to $3.30, believing that in addition to Multimax's revenue stream that will bolster government business, the increased scale will help to expand Harris's operating margin. We are raising our 12-month target price by $2 to $61, based on a communications equipment peer P/E multiple of 18.5X and P/E-to-growth ratio of 1.4X.