Stock Picks: Comcast, Mattel

Comcast Corp. (CMCSA)

Kaufman Bros. reiterates hold

Kaufman Bros. analyst Todd Mitchell said on Feb. 1 that he looked for cable operator Comcast to report "muted" quarterly results on Feb. 3, against "surprisingly strong" comparisons one year earlier. Mitchell said in a note that he thinks Comcast will issue guidance for total revenue and EBITDA growth in 2010 of 3% to 5%, "pretty much in line" with 2009 results.

"Moreover, whereas 2009 got progressively worse over the four quarters of the year,

2010 should be progressively stronger," he wrote. The analyst expects Comcast's capital expenses will fall again in 2010 for another year of "solid" gains in free cash flow.

With the company's planned acquisition of a controlling stake in NBC Universal likely to take nine more months to close, Mitchell said he thinks investor capital "is best deployed elsewhere".

"NBC's tail is wagging Comcast's dog, as Comcast's valuation becomes increasingly dictated by sentiment on NBCU," he wrote.

The analyst has a $17 price target on the shares.

Mattel Inc. (MAT)

Caris & Co. upgrades to buy from hold; raises estimates, price target

Caris & Co. analyst Linda Bolton Weiser upgrades her rating on shares of Mattel, the world's biggest toymaker, on Feb. 1. In a note, Weiser said a 2% decline in the shares on Jan. 29, after the company released strong fourth-quarter results, was "overdone". The decline provided investors an entry point into the stock "ahead of two years of double-digit EPS growth", she wrote.

Weiser noted that Mattel had not had higher than 2% organic local currency sales growth since 2006, but she projected "at least" 4%-5% growth in 2010 and 2011, driven by a return to growth for the company's Barbie franchise and revenue from products tied to several "sizable" movie licenses.

The analyst raised her 2010 earnings per share (EPS) estimate by 14 cents to $1.59, her 2011 EPS projection by 15 cents to $1.75, and her price target to $26 from $24.

Comerica Inc. (CMA)

Standard & Poor's Equity Research maintains buy; changes estimates, raises price target

S&P Equity analyst Erik Oja narrowed his 2010 estimate on bank holding company Comerica on Feb. 1 to a 16 cents loss per share from a loss per share of 30 cents, to reflect his higher loan growth forecast. For 2011, Oja trimmed his EPS estimate to $1.22 from $1.25, on lower fee income projections. He also initiated a 2012 EPS estimate of $1.74.

"We think CMA should trade below peers on tangible book value, reflecting current credit quality, but above peers on earnings, reflecting our expectations for above-peers earnings growth in 2011," Oja wrote in a note. He raised his price target on the shares by $1 to $38.

ITT Educational Services Inc. (ESI)

Morgan Stanley downgrades to equal-weight from overweight

Morgan Stanley analyst Vance Edelson cut his rating on shares of for-profit career training provider ITT Educational Services on Feb. 1 and eliminated his $130 price target on the shares. The analyst said in a note that the prospect of harsh "gainful employment" regulations, which will link program eligibility with a ratio of student debt to potential earnings, "puts ITT's programs at high risk for tuition cuts".

While the U.S. Education Dept. will not issue its final ruling on this for several months, said Edelson, "it has shown no willingness to soften the regulations".

"We cannot be certain of how this proposal will withstand potential legal or legislative challenges, but it is likely to remain a headwind for the near future," he wrote.

Edelson noted that ITT's operating fundamentals remain "strong" and his current estimates remain intact. He said that until program-specific information becomes available, it is difficult to quantify the risk of the proposed new regulations risk on a company-by-company basis.

"More at risk are programs with high tuition," he wrote. "Within our coverage we see ESI as most at risk."

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