S&P Picks and Pans: Exxon Mobil, J&J, AT&T, Schwab

Analyst opinions on stocks making headlines Tuesday

Exxon Mobil (XOM; $89.70)

Reiterates 4 STARS (buy)

Analyst: Stewart Glickman

Exxon Mobil will report second quarter results on July 26. We are projecting EPS of $1.95 vs. $1.72, 3 cents above Street. We anticipate results will benefit from strong refining margins and improving upstream production. Updating our models, we are increasing our full-year 2007 EPS estimate by 25 cents to $6.75, 2008's by 15 cents to $6.72, and 2009's by 6 cents to $6.77. Based on our discounted cash flow model, using a weighted average cost of capital of 9.9% and terminal growth rate of 3%, and blending with relative valuation metrics, we are raising our 12-month target price by $11, to $99.

Johnson & Johnson (JNJ; $62.89)

Keeps 4 STARS (buy)

Analyst: Robert Gold

J&J's second quarter operating EPS of $1.05 vs. 95 cents is 6 cents above our forecast, as impact of in-line sales was outweighed by higher gross margin and lower tax rate than we modeled. Global sales of drug-coated coronary stents fell sharply on lower procedure volume, price pressure and lost European market share. Pharmaceutical sales overall beat our forecast, while consumer products were in line. We are raising our 2007 operating EPS estimate by 2 cents to $4.05, assuming tight cost controls and share buybacks help offset slow second half sales growth ex-currency. Our 12-month target price remains $74.

AT&T (T; $40.21)

Maintains 3 STARS (hold)

Analyst: Todd Rosenbluth

Ahead of AT&T's second quarter EPS announcement July 26, we are keeping our estimates of $29 billion for revenues, operating margin of 23.6%, and EPS of 65 cents. While focus is likely to be on initial sales trends of newer products, such as the iPhone and its fiber-based broadband and video service Uverse, we believe AT&T's EPS will benefit most from cost savings from previous mergers and from share buybacks. Meanwhile, we expect access-line trends to remain weak, limiting revenues. Our 12-month target price stays $40, based on our relative price-to-earnings and enterprise value analysis. AT&T has a 3.5% dividend yield

Charles Schwab Corp. (SCHW; $22.29)

Reiterates 3 STARS (hold)

Analyst: Matthew Albrecht

Second quarter earnings of 23 cents vs. 19 cents are two cents shy of our estimate. Net revenues came up short of our projection on lower net interest income, but cost controls and share repurchases supported per-share results. We believe the company's recent moves to spur client account growth and expand relationships will support increases in client assets, which were up 23% in the past year. We are reducing our 2007 EPS estimate by 6 cents to 92 cents to reflect the recently-completed sale of U.S. Trust, but we keep our 12-month target price at $23, 25 times that estimate, a premium to peers.

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