Stock Picks: Apple, Fluor, Morgan Stanley, Yahoo

Apple: Morgan Keegan equity analyst Tavis McCourt reiterated an outperform rating on shares of Apple (AAPL) on July 21, with a fair value estimate of approximately $340 per share.

On July 20, Apple posted a 78 percent surge in third-quarter profit as customers flocked to the new iPad tablet computer and latest version of the iPhone, helping the company benefit from a rebound in consumer spending.

Net income rose to $3.25 billion, or $3.51 a share, from $1.83 billion, or $2.01, a year earlier, the company said today in a statement. Analysts surveyed by Bloomberg had forecast per-share profit of $3.11. Sales also topped analysts' average estimate, spurring a gain in Apple shares in extended trading on July 20.

In a note, McCourt said Apple's third-quarter earnings per share (EPS) and revenue "significantly beat" his respective estimates of $2.95 and $14.7 billion. He noted stronger-than-expected Mac sales, higher-than-expected average selling prices across Apple's product lines, and stronger margins.

McCourt noted sales of 3.3 million iPads in the first quarter of the device's existence, which nearly matched Mac sales for the period. He said that with iPhone growth stabilizing, the iPad may be the biggest growth driver for Apple, at least until the iPhone moves beyond exclusive distribution by AT&T (T) in the U.S.

The analyst raised EPS estimates for fiscal 2010 (ending September) to $14.40, from $13.31, and for fiscal 2011 to $17.83, from $15.79.

Fluor: On July 21, Morgan Joseph equity analyst Richard Paget reiterated a buy rating and $53 price target on shares of Fluor (FLR), the largest publicly traded U.S. construction company.

In a note, Paget said he expects Fluor to report second-quarter EPS of 66¢, vs. 93¢ a year earlier, when it releases results on July 26. He said he will be looking for updates during the company's conference call on whether uncertainties surrounding the U.S. economic recovery have delayed or scaled back pending projects; the competitive environment and its impact on pricing; and what the company plans to do with its nearly $2 billion in cash on the balance sheet.

"Overall, we remain positive on Fluor's business diversification, end-market exposure, strong client relationships, and technical capabilities," Paget said.

Morgan Stanley: Standard & Poor's equity analyst Matthew Albrecht kept a hold rating and $30 price target on shares of Morgan Stanley (MS) on July 21.

Morgan Stanley, owner of the world's biggest brokerage, reported second-quarter earnings on July 21 that beat analysts' estimates on higher trading revenue. Net income rose to $1.96 billion, or $1.09 a share, from $149 million, or a loss of $1.10 a share, in the second quarter of 2009, the New York-based company said in a statement. Earnings from continuing operations were 80¢ a share, which included a 20¢ tax benefit, compared with the 47¢ average estimate of 21 analysts surveyed by Bloomberg.

In a posting on the S&P MarketScope service, Albrecht said the company's second-quarter earnings from continuing operations beat his estimate of 52¢. He noted that investment banking revenue improved from the preceding quarter, while trading revenue "sagged in a poor trading environment, despite positive debt valuation adjustments."

"We are encouraged by cost controls, and margins should continue to expand as its brokerage joint venture [with Smith Barney] is fully integrated," Albrecht wrote.

The analyst raised a 2010 EPS estimate to $3.08, from $2.80, and lowered a 2011 EPS forecast to $3.15, from $3.32.

Yahoo!: Deutsche Bank equity analyst Jeetil Patel kept a hold rating on shares of Yahoo! (YHOO) on July 21.

On July 20, Yahoo, owner of the second-most popular U.S. Internet search engine, reported second-quarter sales that missed analysts' estimates as marketers devoted online search-ad spending to rival sites.

Excluding revenue passed on to partner sites, Yahoo had sales of $1.13 billion, the Sunnyvale (Calif.) company said in a statement. That compares with the average estimate of $1.16 billion among analysts surveyed by Bloomberg.

Second-quarter net income attributable to Yahoo rose to $213.3 million, or 15¢ a share, from $141.4 million, or 10¢, a year earlier.

Yahoo forecast revenue of $1.57 billion to $1.65 billion for the current quarter.

In a note, Patel said Yahoo delivered a "weak" second quarter, with revenue and earnings coming in below his estimates. He noted weaker-than-expected performance from the company's search and display advertising businesses amid a demand slowdown in second half of June, and that weakness in the high-margin search and fees business continued.

Citing a slower pace of recovery at Yahoo compared with the overall online advertising market, Patel cut third-quarter estimates for revenue to $1.13 billion, from $1.17 billion, and for Ebitda to $400 million, from $415 million. He maintained an EPS estimate for the quarter of 19¢. The analyst also lowered 2010 estimates for revenue to $4.6 billion, from $4.7 billion, and for EPS to 68¢, from 69¢.

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