Stock Picks: Focus Media,, Time Warner Cable

Wall Street analysts offer buy, sell, or hold opinions on stocks in the news on Aug. 24

Focus Media Holding: Susquehanna Financial equity analyst C. Ming Zhao reiterated a positive rating on American depositary shares of Focus Media Holding (FMCN) on Aug. 24. He raised a price target on the ADS to $26, from $24.

On Aug. 23, the Chinese outdoor-advertising company reported second-quarter adjusted earnings per ADS of 30¢, vs. the average estimate of analysts of 23¢. Revenues were $158.2 million, vs. analysts' estimate of $143.7 million.

The company said it expects adjusted net income in the third quarter of $48 million to $49 million, vs. $44.3 million in the second quarter.

In a note, Zhao said the company's second-quarter earnings per ADS topped his estimate of 25¢, while revenues exceeded his expectation of $144.1 million. He said that expanding profit margins are "clearly in [the company's] story." Second-quarter gross profit margins were 82 percent for the company's LCD display business, 44 percent for its in-store network, and 30 percent for its poster frame network.

Zhao said the company gave an "upbeat" third-quarter outlook and sounded optimistic about advertising market growth in the second half of 2010 and in 2011.

The analyst raised his earnings per ADS estimates for 2010 to $1.11, from 96¢, and for 2011 to $1.23, from $1.17. Soleil Securities maintained a buy rating on shares of (PCLN) on Aug. 24. A price target on the shares was raised to $345, from $290.

In a note, equity analyst Jake Fuller said the second-biggest online travel agency "has staged a dramatic comeback since June" as concern over the strength of the euro, macroeconomic issues in Europe, and the sustainability of revenue growth have eased.

"This is a momentum story—and that could yield volatility—but we are comfortable at this point in PCLN's ability to deliver", Fuller said. He cited his confidence in trends for online hotel bookings in the EMEA (Europe, Middle East, and Africa) region, Priceline's competitive positioning, prospects for lower customer-acquisition costs, and "potentially material" contributions to profitability from recently acquired units Agoda (discount hotel bookings in Asia) and TravelJigsaw (rental car bookings centered in Europe).

Time Warner Cable: Miller Tabak equity analyst David Joyce reiterated a buy rating, $67 short-term price target, and $72 long-term target on shares of Time Warner Cable (TWC) on Aug. 24.

In a note, Joyce said he met with the cable system operator's chief operating officer, Landel Hobbs, on Aug. 23. "We have an optimistic takeaway and we reiterate our Buy rating on TWC's financial and operational strength," he said.

Joyce said the company has deleveraged to below its target ratio for debt-to-OIBDA (operating income before depreciation and amortization) of 3.25 times, with its ratio currently at 3.13 times. With his estimate of $650 million to $900 million of stock repurchases annually, the company could still reduce the ratio to 2.2 times OIBDA by 2015, according to his forecast model.

The analyst said that in its second-quarter earnings call on Aug. 5, the company said that its board is reviewing alternatives for return of capital to shareholders, with a possible announcement with the third-quarter earnings release on Nov. 5.

"We believe investors should focus on … TWC's improving competitiveness, due in part to a focus on better segmenting its market (whereby TWC can offer a greater array of products and services to better demographics and leaner offerings at lower price points for more price-sensitive demographics)," the analyst wrote.

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