Good morning, here’s a look at some notes from brokers this morning:
- Time Warner Cable target raised: We are raising our target price from $70 to $78 and adding to TPL due to two reasons: 1) Potential for additional share repurchases and 2) our view that OTT is an unlikely near-term risk.
- Blackgrock, target raised: Affirm our Buy rating and raise 12-month target $15 to $240 as we raise our 2011-12 “adjusted” EPS post 4Q conference call. In our view, the call was bullish around: 1) flows and positioning; 2) margins; and, 3) FCF leverage – with a likely sizeable dividend hike a few weeks away and immunization of Barclay’s related selling pressure. We believe the acceleration in organic growth should warrant P/E multiple expansion: we now use 16x-16.5x target versus 15.5x-16x prior. From a broad perspective, the call was bullish for institutional players and decisively more mixed for US retail platforms – both manufacturers and distributors, we contend. Reiterate our pairing off strategy, and particularly BLK/EV; BEN/AB and AMG/LPLA trade-offs in light of sector implications from BLK’s results.
- Not sounding hot on Eagle Shipping: Korea Lines’ filing for court receivership has thrownthe entire dry bulk market into turmoil.However,although EGLE must have chartered ~25% of its fleet toKorea Line, we believe that the impact will be only minoras the charters are at small premium above current rates.Nevertheless, since the global fleet is expanding rapidly,we see risks that this latest development could act as acatalyst sending overall asset values lower. Therefore,with asset values uncertain and EGLE’s debt above itspeers, its NAV is highly sensitive. Our revised base caseof $5/sh reflects EGLE’s ability to generate positive cashflows, but there are fat tail risks.
- Negative on Yahoo: Yahoo! shares could be challenged in C2011E as core business weakness offsets Asian asset strength. We think competition from social media could drive traffic declines and challenge monetization. We reduce our C2011 revenue and operating income estimates to reflect continued deterioration in the core business, but are tweaking our operating EPS estimates, as a lower tax rate / higher income from affiliates will offset lower core results. We will be keenly focused on market share trends in display / search advertising as we are cautious on Yahoo!’s ability to maintain share as competition increases, despite management’s optimism regarding a positive turn in the business.
- Liking the pricing power at AK Steel: “While rising raw material cost pressures have been a well-documented concern for AK and will continue to be an issue this year, we think rising carbon steel prices and improving volumes will more than offset these headwinds. As a result, we are upgrading AKS to OW from N and raising our Dec 2011 price target to $22 from $18. AKS has also clearly stated that it is interested in securing some degree of raw material integration. While it will clearly not be an easy task to acquire quality iron ore or met coal assets at a reasonable price in the current market, we think any success on this front, given AKS’s generally conservative approach to capital deployment, would also be a positive for the stock.”
- Neutral on big integrated oils like Exxon and Chevron: “Supermajors remain core holdings in US energy portfolios. Although we rate both stocks Neutral, we see the supermajors as core holdings given the geographic diversity of the asset bases, the scale of their operations, the exposure to a variety of project types, and large-scale efforts in research and development. In our view, strong balance sheets favourably position both companies to take advantage of opportunities that arise in the sector. Moreover, we believe track records of consistent dividend increases support the long-term investment case, especially for yield-oriented investors.”
- Liking Harley Davidson: “HOG’s Q4 exceeded expect’s; and underlying performance was even better. We’ve noted a significant and potentially sustainable improvement in market share, a significant rise in average transaction prices, and significant upside surprises on the gross profit margin line. Altogether, we believe that these developments imply higher earnings potential at any level of motorcycle demand. And there is growing evidence that the U.S. motorcycle market is at an inflection point. We maintain our Hold recommendation based on valuation.”
- Buy AMZN calls: “Our analyst sees Street 4Q10 / 1Q11 estimates already discounting the pressures facing Amazon, but not reflecting potential points for positive surprise. The higher costs associated with fulfillment capacity, hiring, and aggressive price cuts through the holidays are already in Street numbers, according to our analyst. However, he sees upside to revenue given Google and eBay results suggesting strong e-commerce activity in the US and Europe, Rakuten commentary suggesting fast e-commerce growth in Japan, and Barnes and Noble trends suggesting rapid e-reader and e-book sales. Several Amazon datapoints are supportive too, including its peak day order volume of more than 13.7mn grew over 40% yoy, and its decision to add seven big fulfillment centres early in 2011.”
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