Analyst Picks and Pans: Cardinal Health, McAfee, Teradyne

Cardinal Health (CAH)

Goldman Sachs upgrades to buy from neutral

Goldman analyst Randall Stanicky said on Sept. 15 that his upgrade of Cardinal follows further analysis and his meeting with company management on Sept. 14. Stanicky notes that persistent challenges and uncertainty around recent spin-off of its clinical and medical products segment have challenged sentiment and left share performance volatile, up a more modest 7% year-to-date vs. the 49% gain for McKesson (MCK) and the 21% advance for AmerisourceBergen (ABC), as well as the 15% advance for the broader S&P 500 index.

Stanicky said that with the spin-off now behind Cardinal, he sees appropriately reset targets against low expectations creating an attractive set-up ahead of what should be a solid fiscal 2011 (ending June).

The analyst maintains an earnings per share (EPS) forecast for Cardianl of $1.99 for fiscal 2010, $2.24 for fiscal 2011, and $2.41 for sical 2012. He raised his $27 price target to $31.

McAfee (MFE)

Jefferies & Co. reiterates buy

McAfee is set to eclipse rival Symantec Corp. (SYMC) as the biggest security software supplier to businesses, Jefferies & Co. analyst Katherine Egbert said on Sept. 15. Egbert said McAfee could surpass Symantec as soon as this quarter.

She added that McAfee is in the final month of an 18-month contract with computer maker Dell (DELL), and she expects Dell to beat out Symantec in what appears to be a "two-horse race."

McAfee is also in early negotiations with Hewlett-Packard (HPQ) for a contract that Symantec already holds, Egbert said. That deal would be about twice as big as the Dell contract, she said.

Along with new opportunities, Egbert said the size of deals is getting bigger. "The increased deal size stems from the upsell of multiple products, not longer contracts," she said.

Teradyne (TER)

Oppenheimer upgrades to outperform from perform

Teradyne shares climbed in premarket trading Sept. 15 after Oppenheimer & Co. upgraded the chip testing equipment maker's stock, citing a key new contract and cost cutting.

In a note to investors, Oppenheimer analyst Gary Hsueh cited a new contract to provide equipment for Qualcomm (QCOM), the wireless communications chip maker, saying the deal "delivers a gut-punch" to rival Verigy Ltd.

Hsueh also pointed to better predictability in orders from network chip maker Broadcom (BRCM) in the fourth quarter. "Combined with unprecedented cost cutting, (Teradyne) is now ripped, with big muscles," he said.

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