Argus' Market Digest Summary
Argus published its Market Digest on the analysis of Facebook Inc. (NASDAQ: FB), Enterprise Products Partners LP (NYSE: EPD), Brinker International Inc. (NYSE: EAT), Gilead Sciences Inc. (NASDAQ: GILD), Pfizer Inc. (NYSE: PFE), Rockwell Collins Inc. (NYSE: COL), Seagate Technology plc (NASDAQ: STX), and Public Service Enterprise Group Inc. (NYSE: PEG).
Analyst Joseph Bonner upgraded Facebook from Hold to Buy and set a PT of $63. On Wednesday, Facebook reported their 3Q earnings and saw a total as revenue of $1.8 billion, a growth of 66 percent YoY. Further, mobile ad revenue grew 49 percent.
Bonner commented, "While management does not plan to further increase the percentage of ads in News Feed, the company's userbase and engagement metrics remain strong, and we expect demand and price increases to continue to drive revenue higher." Bonner raised 2013 EPS estimates from $0.63 to $0.84 and the 2014 forecast from $0.81 to $1.11.
Argus' Michael Burke reiterated the Buy rating and $70PT on Enterprise Products Partners. Enterprise Products reported Q3 EPS of $0.64 versus the estimated $0.68, missing by $0.04. Revenue came in at $12.10 billion versus the estimated $12.17 billion. Burke noted that the third quarter was solid with the adjusted EBITDA up 7.1 percent at $1.14 billion. The analyst added, "We think that Enterprise Products is well positioned to deliver strong long-term growth and to increase cash distributions to unit holders. The distribution currently yields about 4.4%."
Brinker International reported Q3 EPS of $0.43 versus the estimated $0.45, missing by $0.02, on October 23rd. EPS were up 16 percent from the same quarter last year and revenue came in at $683.90M versus the estimated $685.85M. Management's FY14 guidance decreased from $2.70-$2.85 to $2.65-2.75.
Analyst John Staszak commented, "We expect continued modest growth in revenue, margins, and earnings in FY14, as the company upgrades pointof- sale systems and adds new kitchen equipment at many restaurants. We also expect EPS to benefit from continued share repurchases." Staszak maintained his $52 PT.
Argus analyst John Eade raised Gilead Sciences price target from $70 to $84 after a strong third quarter. Gilead reported Q3 EPS of $0.52 versus the estimated $0.48, beating by $0.04. EPS were up 4 percent from the same quarter last year and revenue came in at $2.78B versus the estimated $2.72B. Sales were Up 14 percent year over year.
Eade noted, "Investors are anticipating the launch of Gilead's hepatitis C candidate, sofosbuvir, in December. Sofosbuvir has blockbuster potential and could reach sales of $1 billion near the first anniversary of its launch." The analyst increased the 2014 EPS from $3.00 to $3.25 based on Stribild and sofosbuvir growth.
John Eade reiterated a Buy on Pfizer and raised the PT to $35. Although quarterly profit declined to $0.39 per share, adjusted diluted 3Q13 EPS was up 15 percent from last year at $0.58. Eade commented, "We think that the company's reorganization into three new business segments will enable management to better focus on long-term growth and may lead to another divestiture in 2-4 years." The analyst's guidance estimates remain unchanged.
Rockwell Collins, Inc. reported Q4 EPS of $1.28 versus the estimated $1.32, missing by $0.04. EPS were down 3 percent from the same quarter last year. Analyst Nathaniel Gabriel noted that Rockwell shares are fair valued just below the market price and remains his Hold rating.
Gabriel added, "Still, we like Rockwell's exposure to the burgeoning commercial aerospace sector, which should be further bolstered by the acquisition of ARINC as well as its participation in Boeing's 737 MAX and 787 programs and other programs for Airbus and Bombardier. And while the Government Systems has historically been the larger segment with regard to revenues, we can see Commercial Systems becoming the dominant business as early as FY14."
Analyst Jim Kelleher commented on Seagate's Q3 misses and their dividend increase. Seagate Technology reported Q3 EPS of $1.16 versus the estimated $1.30, missing by $0.14. EPS were down 20 percent from the same quarter last year. Revenue came in at $3.49 billion versus the estimated $3.56 billion and sales were down 6 percent year over year.
Kelleher wrote, "Seagate's board expressed confidence in its long-term outlook and the sustainability and strength of cash flows by raising the quarterly dividend by 13 percent, from $0.38 per common share to $0.43. Seagate also has a wealth of new product initiatives spanning mechanical, solid state, and hybrid memory solutions."
Argus' Gary Hovis noted that Public Service Enterprise Group has a better earnings visibility, raising 2013 operating EPS estimate from $2.35 to $2.50 and the 2014 estimate from $2.40to $2.55. Hovis commented, "PSEG Power is now benefiting from an improvement in the market price of power, higher PJM capacity prices, and a decline in the supply cost of gas.
Although the pace of kilowatt-hour sales growth is slow, we believe that the company will continue to benefit from its strong cost controls, solid cash flow, and favorable regulatory environment." The analyst added that Argus' long-term rating is Buy based on these benefits.
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