Stock Picks: Agrium, Texas Instruments, Waste Management

Wall Street analysts offer buy, sell, or hold recommendations on stocks in the news on Oct. 26

Agrium: Soleil Securities initiated coverage of shares of Agrium (AGU), Canada's second-largest fertilizer producer, with a buy rating and $100 price target on Oct. 26.

In a note, equity analyst Mark Gulley said he views Agrium as a way to play rising corn prices through demand for the company's nitrogen fertilizer.

"The macro[economic] environment is favorable due to low interest rates and a weak dollar," wrote Gulley, with crop prices up an average of 50% since June 30.

"Even after a 70 percent move since June 30, compared to a 12 percent gain in the [Standard & Poor's 500-stock index], the shares are now selling just at 12.7 [times]" his 2010 earnings per share (EPS) estimate of $6.83, the analyst wrote.

Texas Instruments: Credit Suisse equity analyst John Pitzer reiterated an outperform rating and $35 price target on shares of Texas Instruments (TXN), the second- largest U.S. chipmaker, on Oct. 26.

On Oct. 25, Texas Instruments forecast smaller fourth-quarter sales than some analysts had estimated, citing a slowdown in consumer electronics spending. Revenue will be $3.36 billion to $3.64 billion, Dallas-based Texas Instruments said in a statement. The midpoint of that range fell short of the $3.52 billion average estimate of analysts, according to data compiled by Bloomberg. Profit will be 59¢ to 67¢ a share, the company said, compared with a projection of 63¢.

Chief Executive Officer Rich Templeton said consumer demand is cooling, hurting sales of computers and televisions, even while industrial demand remains "especially strong." Texas Instruments is the biggest maker of analog chips, which go into everything from barcode scanners to military radar systems, making its earnings a bellwether of demand for electronics and industrial machinery.

Third-quarter net income rose 60 percent to $859 million, or 71¢ a share, from $538 million, or 42¢, a year earlier. Sales climbed 30 percent to $3.74 billion.

Templeton is getting the company out of the market for digital signal processors that manage radio functions in mobile phones—an area Texas Instruments once dominated. Templeton has said he's focusing instead on analog chips, where the company expects to win more orders and grow faster.

In a note, Pitzer said that the company's third-quarter results and fourth-quarter guidance were "essentially in-line" with his expectations. The semiconductor industry "is still heading for a pause (not downturn), which should change investor focus away from cyclical toward structural growth," he wrote.

Pitzer said his calendar 2011 EPS estimate remains at $2.73. He said he views his estimate as "conservative," implying 3 percent revenue growth, little market share gain, and no stock repurchases by the company. He said his price target assumes a price-to-earnings ratio of 13 times his calendar 2011 EPS estimate—a 10 percent premium to the semiconductor group, which he believes is warranted, given his expectation for market share gains and potential expansion in gross margins.

Waste Management: Wunderlich Securities equity analyst Michael Hoffman reiterated a buy rating and $40 price target on shares of Waste Management (WM) on Oct. 26.

The company is scheduled to report third-quarter earnings before the start of trading on Oct. 28.

"Now that WM stock price performance has closed the gap with its peers, what makes this equity a core holding and not a trading vehicle?" Hoffman asked in a note. He said the investor focus is on the company's main business, solid waste, and that gains from other segments, including waste-to-energy, are "just gravy".

Hoffman said internal revenue growth turned positive in the 2010 second quarter and said "that pattern is only expected to improve, albeit at a modest pace." He said solid waste volumes could be positive in the third quarter and price increases may top 2.5 percent—both of which could result in "an upside surprise" for quarterly earnings.

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