Stock Picks: Goldman, IBM, M&I, Monster

Goldman Sachs Group Inc.: Standard & Poor's equity analyst Matthew Albrecht kept a hold recommendation and $180 price target on shares of Goldman Sachs Group Inc. (GS) on Apr. 20.

Goldman, facing a fraud lawsuit from U.S. regulators, reported first-quarter earnings that surpassed analysts' estimates on Apr. 20 on record fixed-income trading revenue.

Net income at the most profitable investment bank in Wall Street history almost doubled to $3.46 billion, or $5.59 a share, from $1.81 billion, or $3.39, a year earlier, the company said in a statement. The average estimate of 23 analysts surveyed by Bloomberg was for $4.14 per share. Predictions ranged from $3.33 to $5.97.

In a posting on the S&P MarketScope service, Albrecht said Goldman's first-quarter earnings per share of $5.59 beat his $4.34 estimate. He noted that investment banking, asset management and securities fees declined sequentially, but "strong" trading, particularly in the fixed income, currency, and commodity (FICC) business, boosted revenues.

"Compensation accrued at just 43% of net revenues, well below our estimate, and we now expect similar accrual levels for the rest of 2010," Albrecht wrote.

The analyst raised a 2010 earnings per share (EPS) estimate for 2010 by 51 cents to $20.79, and established a 2011 estimate at $22.10. He said his $180 target price was 1.4 times projected book value, below Goldman's historical valuation "as litigation and regulatory risks remain".

International Business Machines Corp.: UBS Securities equity analyst Maynard Um maintained a neutral rating on shares of International Business Machines Corp. (IBM) on Apr. 20. He raised a price target on the shares to $142 from $138.

IBM, the world's largest computer-services provider, reported on Apr. 20 that total sales in the first quarter rose 5.3% to $22.9 billion. Adjusting for foreign-exchange fluctuations, or FX, revenue was little changed from a year earlier, IBM said. First-quarter net income rose to $2.6 billion, or $1.97 a share, from $2.3 billion, or $1.70, a year earlier, IBM said.

IBM also said signings of first-quarter service contracts fell, signaling that spending on larger technology projects may not pick up until the second half of the year. Services signings, which account for more than half of total revenue, dropped about 2% to $12.3 billion, the company said. New contracts for application-management, which help clients maintain and develop software, slid 23%.

The company said profit this year will be $11.20 a share, up from a previous forecast of at least $11 a share. Analysts predicted $11.13 on average, based on estimates compiled by Bloomberg.

In a note, Um said he was "still looking for signs of sustainable revenue reacceleration" at IBM. "We continue to believe improved revenue growth is key to multiple expansion as material margin upside by segment may be challenging," he wrote.

Given expectations for "modestly" better margin expansion, Um raised estimates for 2010 to $99.4 billion in revenues from $99.0 billion, and EPS to $11.23 from $11.06; for 2011, he hiked estimates for revenues to $102.7 billion from $102.3 billion, and EPS to $11.86 from $11.73.

Marshal & Ilsley Corp.: Morgan Keegan equity analyst Robert Patten kept an outperform rating on shares of Marshal & Ilsley Corp. (MI) on Apr. 20.

On Apr. 20, M&I, Wisconsin's largest bank, said first-quarter lending margins improved and overdue loans eased. The first-quarter net loss of $115.4 million, or 27 cents a share, compared with analysts' average estimate for a loss of 40 cents in a Bloomberg survey.

In a note, Patten said M&I's first-quarter loss per share of 27 cents beat his estimate for a loss of 42 cents per share. He said the results showed a clear improvement in credit trends with both provisioning and credit-related overhead expenses down from the previous quarter. Patten also said the bank's reserve building also appears to be nearing an end, which, given the drop in non-performing loan inflows, should lead to declining provisioning expenses, allowing M&I to return to quarterly profitability over the coming quarters.

The analyst said he put his estimates under review pending management's Apr. 20 conference call with analysts. He said he recommends buying the stock, particularly since it had fallen around 7% since Apr. 14.

Monster Worldwide Inc.: Credit Suisse equity analyst John Blackledge raised a rating on shares of Monster Worldwide Inc. (MWW) to outperform from neutral on Apr. 20. He also raised a price target on the shares to $22 from $15.

Blackledge said in a note he expects improving unemployment, increasing job openings, hirings and resignations to drive accelerating operating conditions for the world's largest online-recruiting company in 2011 and 22012. He said he believes the market may be underestimating the acceleration in deferred revenue in the fourth quarter of 2009, which was up 15% sequentially.

The analyst raised 2011 estimates for revenue to $1.05 billion from $1.01 billion and for earnings before interest, taxes, depreciation and amortization, or EBITDA, to $171 million from $14million. He also hiked 2012 estimates for revenues to $1.23 billion from $1.18 billion and for EBITDA to $245 million from $211 million.

Before it's here, it's on the Bloomberg Terminal.