Analyst Picks and Pans: Apple, Danaher, Franklin Resources

Apple Inc. (AAPL)

William Blair & Co. initiates coverage with outperform

Apple should be able to convert more PC buyers to Mac computers over the coming years, William Blair analyst Ralph Schackart said on Sept. 3.

While Cupertino, Calif.-based Apple still has only a sliver of the overall personal computer market, Schackart said the company's iPod and iPhones, along with the iTunes online music store, encourage sales of Mac computers. He suggested the company's "digital content ecosystem ... entices consumers to purchase Apple devices for a complete digital entertainment experience."

Schackart estimates if Apple gained only another 1% share in the computer and smart phone market it could drive earnings per share up by $1.36.

Apple has proved one of the strongest technology companies through the downturn. It reported a 15% jump in fiscal third-quarter profit in July. Sales were up 12%.

In the long-term, Schackart said, "We believe new product introductions will enable Apple to continue to increase its cash flows and convert new consumers to Macs."

Danaher (DHR)

FBR upgrades to outperform from market perform

Danaher Corp. stock rose on Sept. 3 after the diversified industrial company said it plans to buy two large medical technology companies. FBR analyst Deane Dray upgraded the stock saying the deals could energize the company's growth prospects.

The Washington-based company, which makes everything from Craftsman tools to dental X-ray machines, said Wednesday it will pay $1.1 billion, including debt, for two businesses, Applied Biosystems/MDS Sciex, a mass spectrometry business, plus a bioresearch and analytical instrumentation company owned by MDS Inc.

Mass spectrometry is a technique widely used in medical research for determining what elements make up a molecule.

Dray said on Sept. 3 the acquisition should exceed the 5 cents per share to 7 cents per share improvement in earnings that Danaher estimated from the acquisition. "This acquisition fits a best-case scenario that, we believe, could energize the growth story for Danaher," he said.

Franklin Resources (BEN)

Keefe, Bruyette & Woods upgrades to outperform from market perform

Asset manager Franklin Resources Inc. was upgraded on Sept. 3 by Keefe, Bruyette & Woods Inc. analyst Robert Lee because of better-than-expected market performance during the third quarter.

Lee wrote in a research note that Franklin Resources is seeing improvement in assets under management and revenue growth, which should propel its earnings higher in the coming quarters.

Lee increased his 2009 earnings estimate to $3.48 per share from $3.44 per share. He raised his 2010 earnings estimate to $5.35 per share from $5.05 per share.

The price target was increased to $110 from $100 to reflect the higher earnings per share estimate.

Aside from growing its already established businesses, Lee said Franklin Resources is in a position to increase its operations through an acquisition, but would only complete a deal under ideal circumstances.

"Our sense is that while business trends remain on the mend, the company is cautious regarding the environment and expense management, remains interested in acquisitions, particularly if they have a geographic bent, but has little interest in a deal for the sake of simply consolidating assets -- a transaction requires a compelling strategic and financial rationale," Lee wrote in the note.

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