Stock Picks: Accenture, Apple, Oracle, Qualcomm

Wall Street analyst opinions on stocks making headlines in Friday's market

Accenture Plc: Robert W. Baird analyst Reik Read maintained an outperform rating and $48 price target on shares of Accenture Plc (ACN) on Mar. 26.

On Mar. 25, Accenture, the second-largest technology-consulting company, forecast full-year profit that missed analysts' estimates as consulting sales fell and a stronger U.S. dollar crimped earnings. Profit this year will be $2.61 to $2.69 a share, the company said. Analysts in a Bloomberg survey projected $2.71 a share on average.

Consulting sales fell 3% in the second quarter ended Feb. 28, based on U.S. dollars, to $2.93 billion. In local currency terms, the decline was 9%, the company said. New bookings rose to $6.52 billion from $5.53 billion in the fiscal first-quarter that ended in November.

Read said in a note that Accenture's revenue for the quarter largely met expectations, while profitability was slightly off due to a single "weak" project. Based on the lower-than expected profit and less favorable foreign exchange rates, he lowered a fiscal 2010 (ending August) earnings per share (EPS) estimate to $2.63 from $2.75 and a full-year fiscal 2011 EPS forecast to $2.95 from $3.05.

"Despite this, we recommend buying Accenture given a clear trend of improving consulting in most segments, outsourcing improvement, and better core margins than expected. Valuation appears attractive, particularly given [its] strong balance sheet and cash flow," Read wrote.

Apple Inc.: Credit Suisse analyst William Shope reiterated an outperform rating on shares of Apple Inc. (AAPL) on Mar. 26. He also raised a 12-month price target on the iPhone maker to $300 from $275.

In a note, Shope said that as the end of the company's fiscal second quarter approaches, "we believe it is now clear the company is running well ahead of our previous expectations" and consensus estimates of Wall Street analysts.

"[W]e believe Apple is now running well ahead of expectations in all of its key business segments during what is typically a seasonally 'sloppy' quarter," he wrote.

Shope increased his second-quarter quarter revenue and earnings per share (EPS) estimates to $12.26 billion and $2.57 from $11.45 billion and $2.27, respectively.

"[O]ur estimates would imply the March quarter of 2010 would be the second strongest quarter in company history (including seasonally strong December quarters)," the analyst said.

The addition of a profit stream from the company's new iPad, the "significant" profit and cash flow contribution from the iPhone, and an accelerating cyclical recovery in the Mac business suggest analyst consensus estimates and the stock should continue to rise, Shope said.

"Apple is our top pick," Shope said. "We continue to believe investors should be building on positions at current levels."

Oracle Corp.: Deutsche Bank analyst Tom Ernst Jr. maintained a hold rating and $24 price target on shares of Oracle Corp. (ORCL) on Mar. 26.

Oracle, the world's second-largest software maker, reported third-quarter profit that met analysts' estimates on Mar. 25 after customers bought programs they had delayed purchasing during the recession.

Profit before acquisition and some other costs was 38 cents a share in the period ended Feb. 28, the company said. That matched the average of estimates in a Bloomberg survey. Including deferred revenue from Sun Microsystems Inc., which Oracle bought in January, sales were $6.47 billion. Analysts estimated $6.32 billion.

"Oracle appears to have benefited from easier year-over-year [comparisons] and acceleration in their most macro-sensitive business," Ernst said in a note. He said that despite a 2% reduction from foreign currency translation, software license growth from existing businesses was up 10% year-over-year (13% including Sun Microsystems), ahead of the company's 9% guidance. New applications revenue showed a 15% growth rate in constant currency vs. 5% growth for its database and middleware unit.

"[T]he company's competitive rhetoric vs. SAP continued even stronger" during the quarter, the analyst said.

"We are encouraged by the company's tone on integration, reiteration of the operating synergy targets, unchanged $9.6 billion revenue outlook for Sun Microsystems and customer acceptance of the vertically-integrated hardware and software portfolio," Ernst wrote.

Qualcomm Inc.: Credit Agricole analyst Srini Pajjuri lowered a rating on shares of Qualcomm Inc. (QCOM) to underperform from outperform on Mar. 26. He also reduced a price target on the stock to $44 from $48.

Qualcomm, the world's biggest maker of mobile-phone chips, boosted its second-quarter profit and sales forecasts on Mar. 25. Profit, excluding some items, will be 56 cents to 58 cents a share in the period ending this month, compared with an earlier target of as much as 53 cents, Qualcomm said. Analysts in a Bloomberg survey projected 52 cents on average.

Sales will be at least $2.55 billion, compared with a previous goal of at least $2.4 billion, Qualcomm said. Analysts predicted $2.57 billion on average.

Qualcomm's increased fiscal second quarter revenue and EPS guidance validates his view that a first-quarter decline in average selling prices "was a blip", Pajjuri said in a note. "However, lower-than-expected 3G adoption in China is a concern and we are taking a more cautious stance" on chipset sales to Nokia, for which "meaningful" volume for Qualcomm is unlikely until the second half of 2011, the analyst said.

Pajjuri raised a fiscal 2010 (ending September) non-GAAP EPS estimate to $2.36 from $2.20 and a fiscal 2011 EPS forecast to $2.50 from $2.30.

The stock's valuation "looks reasonable", the analyst said, "but we do not see many catalysts on the horizon".

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