S&P Picks and Pans: Altria, BNI, Williams-Sonoma, AMR

Analyst opinions on stocks making headlines Wednesday

S&P REITERATES STRONG BUY OPINION ON SHARES OF ALTRIA GROUP

MO; $69.17

Following its meeting today, the board of directors announced plans to pursue the spin-off of Philip Morris International to Altria shareholders. The board expects to announce the timing of the move following its January 30, 2008 meeting. We believe that Altria will remain holder of 100% of Philip Morris USA and Philip Morris Capital, and should keep its 28.6% stake in SABMiller, but we expect that within 12 months, Philip Morris International will become a separate entity. This supports our sum-of-the-parts analysis indicating our 12-month target price of $85, which assumes a break-up. /R. Mathis

S&P UPGRADES SHARES OF BURLINGTON NORTHERN SANTA FE TO HOLD FROM SELL

BNI; $79.12

Burlington Northern shares are down about 16% from their May peak compared to a 4% drop in the S&P 500 over the same period. We believe the shares are appropriately valued based on historical averages of enterprise value to EBITDA. Our favorable view of Burlington Northern's longer-term fundamentals continues to be tempered by the current slowing in revenue growth, particularly in its intermodal segment, and contract negotiations for both rail and port workers. We are maintaining our 12-month target price of $80. /K. Kirkeby-CFA

S&P REITERATES HOLD RECOMMENDATION ON SHARES OF WILLIAMS-SONOMA

WSM; $31.99

Excluding one-time items, July-quarter EPS of 24 cents, vs. 25 cents one year earlier, is 8 cents above our estimate. Same-store sales rose 1.2%, slightly higher than our projection, and the company was able to contain costs by reducing advertising expenses in a difficult macro environment. We project that the remainder of the year will remain challenging given fierce competition in the home furnishing retail industry. However, we are increasing our fiscal 2008 (ending January) and fiscal 2009 operating EPS estimates to $1.89 and $2.08 from $1.81 and $2.02, respectively, given the July-quarter upside. We are raising our discounted cash-flow-based target price by $1 to $36. /M. Souers

S&P REITERATES HOLD OPINION ON SHARES OF AMR CORP

AMR; $23.83

We are lowering our revenue growth rate forecast for AMR to 2% from 3% on our view that domestic pricing is likely to remain competitive after the recent start-up of Virgin America's new transcontinental travel routes, and amid continued growth at low-cost carriers. Also, we now think average jet fuel prices will remain higher than our previous target. We are cutting our 2007 EPS estimate to $2.68 from $2.93, but we are leaving 2008's at $3.50. We are reducing our 12-month target price by $5 to $27, at about 8 times our 2008 estimate, below the peer average. /J. Corridore