S&P Picks and Pans: Alcoa, HSBC, RIM, Gilead

Analyst opinions on stocks making headlines Monday

Alcoa (AA; $41.60)

Reiterates 2 STARS (sell)

Analyst: Leo Larkin

Shares of Alcoa are up in premarket trading on an unconfirmed report in the Times of London that BHP Billiton (BHP), the world's largest mining company, is in the early stages of planning a $40 billion bid to acquire the company. While we think BHP has the financial wherewithal to accomplish such a transaction, we do not believe that it is likely to acquire Alcoa. In our opinion, aluminum is not as attractive an asset as the other metals and minerals that BHP currently produces. With Alcoa trading above our p-e-based 12-month target price of $36, our opinion is sell.

HSBC Holdings (HBC; $92.63)

Maintains 3 STARS (hold) on American Depositary Shares

Analyst: D. Chambers

We are raising our pretax profit forecast for 2007 by 6% to $25.8 billion and increasing our 2007 earnings per ADS estimate to $8.05 from $7.55, though we are trimming 2008's to $8.45 from $8.65. We believe non-recurring gains could amount to a total of $2 billion from the sale and leaseback of company headquarters, write-ups in the value of listed Chinese subsidiaries following IPOs, and the Bank of Communications listing in second quarter 2007. Our 12-month target price remains $96, based on our DCF model, which assumes a 10% cost of equity and medium-term volume growth of 9%.

Research In Motion ((RIMM; $175.64)

Maintains 3 STARS (hold)

Analyst: Todd Rosenbluth

Ahead of May-quarter results expected in late June, we are raising our EPS estimate by 5 cents, to $1.14, based on increased expectations for its handsets sold to a consumer audience, boosted by new products. We are also increasing our fiscal 2008 (Feb.) EPS estimate by 12 cents to $4.82 and our fiscal 2009 estimate by 24 cents to $6.24 to reflect stronger revenues and slightly wider operating margins from greater scale. With our EPS changes, we are raising our 3-year EPS growth forecast to 23% from 20%, and our 12-month target price to $175 from $150 using a peer-average p-e-to-growth rate of 1.5 times.

Gilead Sciences (GILD; $80.95)

Reiterates 4 STARS (buy)

Analyst: Steven Silver

Gilead announces FDA approval of ambrisentan for treatment of pulmonary arterial hypertension, to be marketed as Letairis. We expect strong Letairis results, given its favorable safety profile and once-daily dosing advantage over competing drugs. While we believe this event was expected, we also note our favorable view of Gilead's product diversification, with its HIV franchise accounting for more than 80% of 2006 revenues. We are similarly encouraged by recent positive Phase III trial data from Viread in Hepatitis B and aztreonam lysine in cystic fibrosis.