Stock Picks: Apple, CSX, Yahoo

Apple Inc.: Kaufman Bros. equity analyst Shaw Wu maintained a buy rating and $374 price target on shares of Apple (AAPL) on Oct. 14.

In a note, Wu said the maker of personal computing and mobile communication devices announced on Oct. 13 that it will host a special event at its campus in Cupertino, Calif., on Oct. 20. Wu said he believes the event will likely focus on Mac OS X 10.7, its next-generation Mac operating system.

Wu said the event could offer a "sneak peek" at touchscreen functionality for Mac computers.

The analyst said new Mac models may be unveiled at the event. In "our view, the MacBook Air could use an update, as it is arguably a little long in the tooth," he said. He also said he believes the next version of Apple's iLife application suite could be unveiled and that MacBook laptop models could be refreshed.

CSX: Credit Suisse equity analyst Christopher Ceraso maintained an outperform rating on shares of CSX (CSX), the second-largest publicly traded U.S. railroad, on Oct. 14. He raised a price target on the shares to $80 from $76.

On Oct. 13, CSX reported third-quarter profit that topped analysts' estimates as a 44 percent increase in automotive shipments boosted rail volume. Profit from continuing operations climbed to $414 million, or $1.08, from $290 million, or 73¢, a year earlier, the Jacksonville (Fla.) company said in a statement. The average estimate of 24 analysts surveyed by Bloomberg was profit of $1.04 a share.

Total shipping volume rose 10 percent, CSX said. Sales climbed 16 percent, to $2.67 billion, helped by higher prices and revenue gains in autos, chemicals, and fertilizers.

In a note, Creaso said CSX's earnings topped his expectations on higher-than-anticipated operating margins of 30.9 percent (he had forecast 29.1 percent), driven primarily by lower materials, fuel, and labor expense.

The analyst raised earnings per share (EPS) estimates for 2010 to $4.07 from $3.92; to $4.80 from $4.64 for 2011; and to $5.35 from $5.19 for 2012.

Yahoo!: Standard & Poor's equity analyst Scott Kessler reiterated a strong buy rating on shares of Yahoo (YHOO) on Oct. 14.

On Oct. 14, Bloomberg News reported that Yahoo, which spurned an unsolicited offer from Microsoft in 2008, is working with Goldman Sachs Group to help defend against possible takeover approaches, citing three people familiar with the matter.

While the Sunnyvale (Calif.) company hasn't received an offer, Yahoo has been working with advisers for about two weeks to field any approach, said the people, who asked not to be named because the talks are private. AOL (AOL) has talked with private equity funds, including Silver Lake, about a possible bid, two people familiar with the matter said.

Discussions between AOL and private equity firms are preliminary and have recently focused on a possible purchase of parts of Yahoo, two people said. The private equity funds have weighed raising $10 billion to $12 billion, these people said.

Neither AOL nor private equity funds have approached Yahoo, the people said. Representatives of AOL, Yahoo, and Goldman Sachs declined to comment.

Private equity firms, bankers, and some Yahoo investors have been pitching the idea of a Yahoo takeover to AOL and News Corp., according to a person familiar with the conversations. The idea is that Yahoo should focus on being a media company and align itself with another media-focused company, the person said. A spokeswoman for News Corp. declined to comment.

News Corp., based in New York, owns The Wall Street Journal, Fox News, a film studio, and MySpace. AOL, since its December spinoff from Time Warner, has been trying to reshape itself into a media-driven company by investing in community news and niche online content and, last month, by buying news blog TechCrunch.

The technology blog AllThingsD, owned by Dow Jones, publisher of The Wall Street Journal, previously reported that companies that include AOL and Silver Lake have weighed an offer for Yahoo.

"We see significant value in YHOO," Kessler wrote in a posting on the S&P MarketScope service. He said he thinks Yahoo's "plodding" growth, recent executive departures, and investor frustration with the stock's performance could lead to a transaction.

"However, we believe such a deal would be complex and require buy-in from many parties," Kessler said.

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