Analyst Picks and Pans: Goldman Sachs, Home Depot, Corning

Goldman Sachs Group (GS)

Pali Research upgrades to buy from neutral

Pali analyst Douglas Sipkin said on Aug. 18 that Goldman's fixed income, currencies, and commodities businesses, while not expected to outperform the first half of 2009, should remain strong though the seasonally slow second half. Sipkin said it appears as though redemptions for hedge funds stabilized, which should bode well for Goldman's prime brokerage business, especially in light of reduced competition. The analyst noted that both M&A and IPO backlog have shown signs of improvement. He also expects that Goldman will have a significantly lower compensation rate in the fourth quarter.

Sipkin raised his $17.45 2009 earnings per share estimate to $18.06, and his $17.16 2010 EPS forecast to $18.47. He set a $210 price target on Goldman's stock.

Home Depot (null)

Janney Montgomery Scott reiterates buy

Janney analyst David Strasser said on Aug. 18 that "he's a buyer" of Home Depot, as he believes the company's ongoing turnaround will counter the ongoing weak macro environment. Strasser noted that Home Depot's adjusted second-quarter earnings of 64 cents per share (67 cents excluding a tax benefit) topped his 59 cents estimate, which had been raised from 55 cents earlier in the second quarter. Strasser believes traffic has improved on better advertising, a more sophisticated pricing strategy, and general improvements in service levels at stores.

With the company now seeing fiscal 2010 (ending January) non-GAAP earnings per share down 15%-20%, or $1.42-$1.51 (vs. down 20%-26% before), the analyst has put his current model under review.

Corning (GLW)

Oppenheimer upgrades to outperform from perform

Oppenheimer analyst Yair Reiner upgraded Corning on Aug. 18, saying investors are underestimating a potential recovery for the maker of liquid crystal display glass. Reiner also established a $19 share price target.

In a note to clients, Reiner wrote that Corning shares have "flat-lined" since the spring. "The main reason for this underperformance appears to be the concern that Street estimates are not achievable, or that (Corning) could see demand plummet once LCD inventory replenishment runs its course."

He wrote that "our analysis suggests such anxieties are inflated."

Reiner said Corning can top earnings of $1.50 per share in 2010, even in the case of "muted" international growth. The average analyst forecast calls for $1.47 per share, according to a Thomson Reuters survey.

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