What Wall Street Analysts Are Buzzing About This Morning


Good morning, here’s your daily morning research takeout:


  • Earnings Preview: Analysts expect results to be generally in line with analyst forecasts as many stocks have already taken a haircut. Biggest concern out of results will be word of fourth quarter and 2012 guidance, softening cyclicals and European contagion.
  • Morgan Stanley (NYSE: MS): Lowering heading into earnings on trading and banking weakness and credit spread widening. Analysts see $0.50 earnings per share, but a loss of nine cents in core results. 
  • Sprint (NYSE: S): Citi sees funding needs lower than other banks at $3 billion. That will be used for iPhone subsidies and 4G expansion.

Credit Suisse:

  • Microsoft (NASDAQ: MSFT): Third quarter PC data was released by Gartner after the close. Estimates point to 3.2% year-on-year and 8.8% quarter-on-quarter growth in unit sales. Credit Suisse sees Windows 8 as a catalyst for MSFT, but lowers its price target to $35 from $36.

Deutsche Bank:

  • Home Sales: Even with new home sales near historic lows of 164,000, inventory overhang from the existing home market keeps the market flush. Foreclosures are up as banks begin to test if they can finally begin adding to the inventory glut without stalling the market. Resale inventories remain at 3.2 million, down from 3.9 million during the 2008 peak.
  • Alcoa (NYSE: AA): Lowering targets following disappointing earnings. Price target set at $12 from $14 and cutting alumina volumes by 8% in 2012 and 2013.

Goldman Sachs:

  • Price Changes: Increase: Onyx Pharmaceuticals (new $44.00 v. old $40.00), PepsiCo (new $66.00 v. old $65.00), Rackspace Hosting (new $54.00 v. old $44.00); Declines: Amylin Pharmaceuticals (new $8.00 v. old $9.00), Johnson Controls (new $40.00 v. old $42.00), WellCare Health Plans (new $48.00 v. old $49.00)
  • Aerospace: Both Boeing and Airbus reiterated growth expectations that global air traffic will double over the coming 15 years, creating a seven year backlog for the manufacturers. Goldman thinks this makes them nearly recession proof.
  • Healthcare: Analysts expect large caps like Amgen, Gilead, Celgene and Biogen to meet or beat Street expectations for the quarter. Foreign exchange rate risks look manageable. Goldman will be looking to see if pricing trends in the Eurozone remains stable.
  • Johnson Controls (NYSE: JCI): The company announced 2012 EPS guidance of $2.85 to $3.00 at its investor day. Expects automotive segment growth of 7 to 8%. Battery outlook remained unchanged.

J.P. Morgan:

  • Life Insurance: AIG, MetLife, and Prudential meet the criteria as non-banks for SIFI capital requirements, but this may not be as bad as investors see. Requirements may not be too onerous for non-banks. Outlook remains positive.
  • Coinstar (NASDAQ: CSTR): RedBox likely gained on Netflix price changes, which should benefit Coinstar. Price target increased to $50.00 a share and 2012 EPS to $3.13 from $2.89, though that remains well below consensus.


  • Airlines: Even against slowing growth, airlines are booking revenues above the average pace. Analysts are forecasting third quarter sales up 10% for industry and revenue per available seat mile increasing 8% in the fourth quarter. Delta and U.S. Airways may see highest passenger revenue per available seat mile increasing above industry average in 2012, at 6.4% and 4.7%, respectively.
  • PepsiCo (NYSE: PEP): Analysts are lowering 2011 and 2012 earnings per share estimates to $4.36 and $4.74 on increasing cost pressures and moderate price growth. However, outlook has improved and revenue should accelerate to 8.3% in the fourth quarter.
  • United Technologies (NYSE: UTX): After the close yesterday, United Technologies announced it would purchase Rolls Royce’s one-third stake in International Aero Engines for $1.5 billion. IAE produces aircraft engines for the Airbus A320. Pratt retains two-third interest in IAE.

Goldman also has a list out for option traders this morning. Take a look here >

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