S&P Picks and Pans: Fannie Mae, Adtran, Kimco
S&P MAINTAINS STRONG BUY OPINION ON SHARES OF FANNIE MAE
According to a report by the Wall Street Journal, OFHEO, which regulates Fannie and Freddie Mac (FRE; $60.00), may lift the current cap on the GSEs' retained portfolios (currently around $725 billion) by February, 2008, assuming the GSEs return to timely reporting by then. We view this as a positive, as Fannie's and Freddie's net interest income would likely rise as a result. Separately, as of June, 2007, Fannie's core capital totaled $42.4 billion, exceeding OFHEO's minimum by $2.9 billion. Fannie is considering a preferred stock transaction to raise funding levels. We are keeping our 12-month target price at $75. /S. Plesser
S&P MAINTAINS HOLD OPINION ON SHARES OF ADTRAN INC.
Adtran sees third quarter revenue flat compared to the second quarter, below our forecast for a 7% sequential increase, reflecting a constrained telecom capital spending environment, particularly for the company's optical access products. We see Adtran's long-term market position as attractive, given its focus on the growing broadband market. However, we believe today's lowered guidance points to low sales visibility, as products are delivered with very short lead times. Based on p-e-to-growth analysis, revised to account for slower 2007 growth, we are lowering our 12-month target price by $3 to $27. /A. Bensinger
S&P DOWNGRADES OPINION ON SHARES OF KIMCO TO HOLD FROM BUY, ON VALUATION
After rising since the start of September, Kimco shares exceeded our 12-month target price of $41, which we are raising today to $48 based on our revised price-to-funds from operations and peer analyses. Although we expect operating trends to continue to improve, driven by healthy retail conditions, we think the shares are fairly valued and would not add to positions. We expect KIM to report per-share funds from operations of 56 cents on Oct. 26, vs. 50 cents one year ago, with revenues rising about 12% to $172 million. We expect occupancy levels to rise, and remain in the mid-90's. /R. McMillan