Stock Picks: Chevron, ITT, MetLife

Wall Street analysts offer buy, sell, or hold opinions on stocks in the news on Aug. 2

Chevron: Credit Suisse equity analyst Edward Westlake reiterated an outperform rating on shares of Chevron (CVX) on Aug. 2, with a price target of $93.

On July 30, Chevron, the second-biggest U.S. oil company, said second-quarter profit tripled, exceeding analysts' estimates, after recovering demand for petroleum-based fuels lifted energy prices.

Second-quarter net income jumped to $5.41 billion, or $2.70 a share, from $1.75 billion, or 87¢, a year earlier, Chevron said in a statement. Per-share profit was 24¢ higher than the average of 18 analysts' estimates compiled by Bloomberg.

Revenue climbed 32 percent, to $53 billion, Chevron said. Oil and natural gas production rose 2.8 percent, to the equivalent of 2.75 million barrels of crude a day.

In a note, Westlake said that at the end of the second quarter, Chevron had close to $10 billion in cash on its balance sheet and should generate around $31.8 billion in cash flow in 2010, with targeted capital investment of $21.6 billion and a dividend of $5.7 billion. "This leaves some $4.4 [billion] of cash flow left over, yet management refrained from buying back stock in [the third quarter,] raising acquisition fears," he wrote.

"We believe the lack of buyback signals management intentions to continue to reinvest organically rather than acquire" other companies, he said.

Westlake raised a 2010 earnings per share (EPS) estimates to $9.68, from $9.41.

ITT: Janney Montgomery Scott analyst James Lucas reiterated a buy rating on shares of ITT (ITT) on Aug. 2, with a fair value estimate of $68.

On July 30, ITT, the provider of night-vision goggles to the U.S. Army, said second-quarter revenue was $2.74 billion, 3.5 percent less than the average of nine analyst estimates in a Bloomberg survey.

In a note, Lucas said ITT reported adjusted second-quarter EPS of $1.14, which beat his forecast of $1.07.

Lucas said ITT "has long been a multi-industry company with roughly half of its portfolio dedicated" to defense operations, with the other half consisting of fluid handling (primarily water) and motion businesses. "[A]fter many years of rightsizing the business, margins are showing healthy expansion," he said. "ITT's earnings have held in better than many other companies, and growth continues."

The analyst noted that ITT has made three acquisitions in the fluid business and divested a small systems engineering and technical assistance business in its defense unit "to reduce perceived conflict of interest within the company's business, and these actions help de-emphasize the defense revenue in the company total."

Lucas lowered his 2010 EPS estimate to $4.15, from $4.20, and left his 2011 forecast unchanged at $4.70.

MetLife: Standard & Poor's equity analyst Bret Howlett reiterated a buy recommendation on shares of MetLife (MET) on Aug. 2.

On Aug. 2, MetLife, the insurer buying a non-U.S. unit from American International Group, said earnings per share will be lower than previously forecast after it boosted the size of a stock sale to fund the deal.

The acquisition will add 40¢ to 45¢ to next year's operating earnings per share, New York-based MetLife said in a regulatory filing. That compares with a projection of 45¢ to 55¢ in March, when the company announced the purchase. MetLife is selling 75 million shares, valued at $3.15 billion as of the July 30 close. That compares with the $2 billion the insurer planned in March.

"Based on what we've outlined today, we think those will be the effective sources of financing for the deal," Christopher Breslin, a spokesman for MetLife, said in a telephone interview.

Chief Executive Robert Henrikson agreed in March to pay about $15.5 billion for AIG's American Life Insurance (Alico) to expand in nations that include Japan and Poland. The deal is valued at about $16.1 billion based on the July 30 value of MetLife securities, the company said in a separate filing.

"We view the planned acquisition favorably and believe it will expose the company to faster-growing insurance markets," Howlett wrote in a posing on the S&P MarketScope service. He said he expects the company to realize "significant synergies" from the deal and believes Alico "will boost return on equity by [more than] 100 basis points" in 2011. (A basis point is one one-hundredth of one percent.)

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