Stock Picks: Ford, Infosys, JPMorgan
Ford Motor: Soleil Securities maintained a buy rating and $18 price target on shares of Ford Motor (F) on Sept. 1.
In a note, equity analyst Michael Ward said Ford's cost and revenue restructuring have positioned the automaker to be "a prime beneficiary" of an improving industry environment. "[A] faster-than-expected improvement in its balance sheet, in our view, adds support to our Buy rating for the stock," he said.
Ward said the upcoming initial public offering of General Motors "could renew interest in the sector and increase visibility for Ford, which we view as the best positioned [automaker] to capitalize on current industry trends."
The analyst said combined proceeds from the sale of the company's Volvo unit, along with dividends from its Financial Services Group, should enable Ford to reduce debt by $3 billion in the second half of 2010.
"[W]e expect operations to provide about $2 billion of cash surplus, bringing the net automotive debt balance to zero heading into 2011," he said.
Infosys Technologies: Kaufman Bros. equity analyst Karl Keirstead reaffirmed a buy rating and $72 price target on shares of Infosys Technologies (INFY) on Sept. 1.
Keirstead said in a note that at an analyst meeting in New York, at which the company's chief operating officer and chief financial officer addressed the audience from India via videoconference, the company acknowledged that it faces macroeconomic challenges, even though revenue growth has accelerated over the last three quarters.
Infosys used "an incrementally more cautious" tone at the meeting, Keirstead said.
Citing "worsening U.S. economic variables," and "lingering concerns in Europe," Infosys expressed caution about growth in fiscal 2012 (ending March), the analyst said. The company argued that deteriorating economic data over the next few months could impact client confidence and 2011 information technology budgets, he said.
"While in many respects this is stating the obvious, the tone shift is, in our view, a net negative" for the stock, Keirstead wrote.
Keirstead noted that Infosys said it remains on track to meet or exceed its September-quarter and fiscal-2011 revenue guidance.
"Our bullish call on the Indian [technology outsourcing] firms is rooted in a view that in 2011 [macroeconomic] headwinds will be largely offset by a continued client focus on moving an even greater share of IT support costs to cheaper offshore locations," he said.
JPMorgan Chase: Standard & Poor's equity analyst Erik Oja maintained a strong buy rating and $50 price target on shares of JPMorgan Chase (JPM) on Sept. 1.
On Sept. 1, Bloomberg News reported that JPMorgan told traders who bet on commodities for the firm's account that their unit will be closed as the company, the second-biggest U.S. bank by assets, starts to shut down all proprietary trading, according to a person briefed on the matter.
The bank eventually will close all in-house trading to comply with new U.S. curbs on investment banks, said the person, who asked not to be identified because New York-based JPMorgan's decision hasn't yet been made public.
Closing the proprietary trading desk for commodities affects fewer than 20 traders, one in the U.S. and the rest in the U.K., the person said. The unit is based in London and traders there were given notice on Aug. 27 that their jobs were at risk, as required by U.K. law, according to the person. Proprietary traders in fixed-income and equities, who amount to 50 to 75 employees, will need to find jobs when those desks are shut down, this person said.
"We think our unchanged 2011 EPS [earnings per share] estimate of $4.38 already reflects the impact of such actions," Oja wrote in a posting on the S&P MarketScope service. "In addition, we see a decline in loan-loss provisions in relation to chargeoffs as the catalyst for the shares."
Oja said his price target of $50 is based on a price-to-earnings multiple of 11.4 times his 2011 EPS estimate, "roughly … equivalent" to the bank's industry peer group.