Stock Picks: Google, Boston Scientific, CME, ICE

Google Inc.: Standard & Poor's equity analyst Scott Kessler reiterated his buy rating on shares of Google Inc. (GOOG) on Feb. 11.

On Feb. 10, Google, owner of the world's most popular Web-search engine, said it is planning to build high-speed fiber-optic broadband networks in the U.S. to offer Internet speeds that are more than 100 times faster than what Verizon Communications Inc. (VZ) and AT&T Inc. (T) sell today. The company said it will offer the service at a "competitive price" to at least 50,000 people and potentially as many as 500,000.

In a Feb. 11 note, Kessler said that Google intends to employ these experimental efforts to learn about related novel deployment techniques and next-generation applications, and promote more openness and choice associated with high-speed connectivity. With the effort expected to provide access to up to only 500,000 people, Kessler said he does not think this initiative will have much impact on Google's financials. "[W]e viewed similar sounding efforts involving municipal Wi-Fi, driven by the likes of EarthLink [ELNK] as failures," Kessler wrote.

Boston Scientific Corp.: Deutsche Bank analyst Tao Levy downgraded a rating on Boston Scientific Corp. (BSX) to hold from buy on Feb. 11, saying that 2010 will be a "rebuilding year" for the world's second-largest maker of heart devices.

On Feb. 10, Boston Scientific reported fourth-quarter results that missed analysts' estimates. Its fourth-quarter loss narrowed to $1.08 billion, or 71 cents a share, from $2.39 billion, or $1.59 cents, in the period a year earlier. The loss included $1.27 billion in litigation-related charges associated with the settlement of patent disputes with Johnson & Johnson (JNJ). Revenue for the fourth quarter rose 3.8% to $2.07 billion. The company forecast sales of $8.1 billion to $8.5 billion for 2010, and earnings adjusted for one-time costs of 62 cents to 72 cents a share.

Boston Scientific also said it will cut up to 1,300 jobs, or 10 percent of its non-manufacturing workforce.

"In light of various restructurings, a growth profile that will remain anemic for several quarters, and operating leverage that is likely a year away from fruition, we are stepping to the sidelines on BSX," Levy wrote in a note to clients. "While we had expected a quicker turnaround, it is now apparent that mending the company will require more time and resources."

The analyst also said the company's recent legal settlement with Johnson & Johnson delays Boston Scientific's ability to make acquisitions that would add to its growth.

Levy lowered earnings per share (EPS) estimates for 2010 to 64 cents from 80 cents; for 2011 to 74 cents from 90 cents; and for 2012 to 96 cents from $1.08. The analyst also cut a price target on the shares to $8.50 from $11.

CME Group Inc. and IntercontinentalExchange: Raymond James analyst Patrick O'Shaughnessy upgraded ratings on CME Group (CME), the world's largest futures market, and IntercontinentalExchange (ICE), second-largest U.S. futures market, to outperform from market perform on Feb. 11.

In a note to clients, O'Shaughnessy said he believed a combination of regulatory risk as well as recent overall market weakness has created very attractive valuations for exchange companies. He noted that all four publicly traded U.S.-based exchanges (including Nasdaq OMX [NDAQ] and NYSE Euronext [NYX]) are each down more than 10% over the last four weeks and are currently trading well below their average forward multiples.

"[W]e believe the growth prospects of the exchanges are underappreciated right now," the analyst wrote. He noted that trading volumes are generally running at "very healthy" levels, and said he "believes there are good reasons to expect continued growth in these volumes, particularly in futures contracts".

"While there are a multitude of various regulatory efforts currently underway that could potentially impact exchange trading, we believe that, by and large, they will prove either inconsequential or positives for the exchanges," O'Shaughnessy wrote.

Regarding IntercontinentalExchange, O'Shaughnessy said he expected "extremely strong" energy trading activity " to continue, and that the company had a strong pipeline of new energy products. He established a price target of $115 on the stock.

"We expect CME Group's shares to perform well due to the pent-up demand in interest rate futures trading," he wrote. He said the recently announced deal to acquire an interest in the Dow Jones index business should add to earnings in the long term. O'Shaughnessy established a price target of $330 on CME.

Nordstrom Inc.: Jesup & Lamont analyst Barbara Wyckoff reiterated a buy rating on shares of department-store operator Nordstrom Inc. (JWN) on Feb. 11.

In a note to clients, Wyckoff said she was raising he fourth-quarter earnings per share (EPS) estimate to 82 cents from 77 cents, representing a 162% increase over the 31 cents the company reported in the year-earlier quarter. "[O]ur new estimate could be still low given the high quality of the fourth-quarter sales," she said, noting that Nordstrom's comparable-store sales jumped 7.1% vs. a 12.5% decline a year earlier.

Wyckoff also noted that inventory levels were low going into the 2009 fourth quarter and markdowns were "well controlled" compared to the prior year, when aggressive competition forced Nordstrom to match discounts.

The analyst reiterated her $47 price target on the shares. "[The] share price has languished in the past few weeks and we believe that this is a good time to start or add to a position," she wrote.

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