Change in Ratings Apollo Group ( APOL) was upgraded at Bank of America to Neutral from Sell. Maintains $60 price target and 2008 EPS estimates of $2.70. Bank of America ( BAC) was upgraded to Market Perform, Keefe, Bruyette & Woods said. $25 price target. Valuation call, with the stock trading at 9.5 times expected 2009 earnings and 2.1 times tangible book value. J.P.Morgan said it is upgrading BMC Software ( BMC) to Neutral from Underweight based on value of maintenance revenue stream. Note mainframe database tools business is experiencing stable pricing environment. Celgene ( CELG) was upgraded from Neutral to Outperform, Cowen said. Valuation call, as the stock is not fully pricing in the company's expected growth over the next few years. J.P.Morgan said it is upgrading Citrix ( CTXS)to Overweight from Neutral based on valuation and low market expectations. Note that shares trade at 22% discount to NPV of recurring revenue. Price target at $26. Estee Lauder ( EL) was downgraded from Equal-weight to Underweight, Morgan Stanley said. $48 price target. Estimates also cut, because of weaker expected sales demand. Energizer ( ENER) was downgraded to Equal-weight, Morgan Stanley said. $102 price target. Estimates also cut, given the company's foreign currency exposure.
KLA-Tencor ( KLAC) was downgraded from Buy to Neutral, Bank of America said. $29 price target. Expect lower industry cap-ex spending, heading into 2009. Kimberly-Clark ( KMB) was upgraded from Underweight to Equal-weight, Morgan Stanley said. $70 price target. Moderating input costs should give the company some margin relief.
Symantec ( SYMC) was upgraded to Overweight from Neutral, J.P.Morgan said. See attractive valuation based on cash flow from maintenance, and believe investors are essentially getting the consumer business for free. See upside from enterprise security business, which is currently a low profit contributor. Price target at $20. AT&T ( T) numbers were lowered at Bank of America. AT&T shares now seen reaching $36, according to Bank of America. Estimates also cut, given a more conservative economic outlook. Buy rating. The rating on AT&T also was cut from Outperform to Sector Perform, RBC Capital said. $32 price target. Estimates also cut to reflect higher wireless subsidies and a challenging wireline environment. Stock Comments/EPS Changes Advance Auto Parts ( AAP) numbers lowered at Bank of America. Price target lowered to $42 from $46. 2008 EPS estimates lowered to $2.58 from $2.75. Maintains Buy rating. Goldman said it is upping its price target on Advanced Micro Devices ( AMD) to $4.50 from $3.50 following announcement of the creation of The Foundry Company in conjunction with ATIC. See significantly less bankruptcy risk based on reduced debt load, but still see major technology challenges and execution risk. Maintained Sell rating. AutoZone ( AZO) numbers lowered at Bank of America. Price target lowered to $126 from $129. Fiscal 2009 EPS estimates lowered to $10.50 from $10.76. Maintains Neutral rating. Illinois Tool Works ( ITW) estimates and price target were reduced at Bank of America. ITW preannounced lower EPS expectations for 3Q and FY08. Weakness attributed to NA market deterioration in Sept, margin pressures and unfavorable currency. Mgmt lowered 3Q08 EPS to $0.86-0.90 vs. previous $0.93-0.99 and Consensus of $0.94. Full year revenue growth reduced slightly to 9-11% from 9-12%. BofA lowered PT to $42 form $56 or 12.5-13x 2009 EPS estimate of $3.28, reduced from $4.10.
O'Reilly Automotive ( ORLY) numbers lowered at Bank of America. Price target lowered to $29 from $31. 2008 EPS estimates lowered to $1.55 from $1.60. Maintains Neutral rating. US Steel ( X) estimates and price target were reduced at BofA, which reiterates Sell rating, believes more downside risk ahead. Lowering 2009 EPS to $10.00 from $20.00. BofA notes that X is trading at 0.8X book value, inline with steel group. Price target of $42 based on 4-5X forward P/E and 0.7X book value. US Steel's target price was also cut at Credit Suisse, which said it is cutting its target price from $210 to $86 based on lower spot price assumptions. Maintained Neutral rating. Yahoo! ( YHOO) target price cut at Bank of America, which said it is lowering its target price on YHOO to $16 from $24. Sees increased risks from weakened display advertising and few catalysts in the near-term. Strategy Calls/Market Calls Bank of America starts coverage on three video game stocks. Activision ( ATVI) and Electronic Arts ( ERTS) were initiated with Buy ratings, Bank of America said. Companies have strong portfolios and excellent management teams. Coverage of THQI was also started with a Neutral rating and $12 price target. Still waiting for signs of a more complete turnaround.
CSX ( CSX) and Burlington Northern ( BNI) were downgraded from Buy to Neutral, Merrill Lynch said. Targets cut by an average of 25% and 2009 estimates by 7%, as the economy should remain weak into the new year.
Ratings on Ford ( F) and GM ( GM) were cut from Hold to Sell, Citigroup said. Ford target cut to $2.50, and GM now seen reaching $6 a share. Companies are being hurt by credit conditions, and now look more expensive than the parts suppliers. Morgan Stanley changes ratings on three steel stocks. US Steel and Steel Dynamics ( STLD) were downgraded to Equal-weight, Morgan Stanley said. China continues to export, and steel prices have likely not yet bottomed. On the other hand, the rating on NUE was raised to Overweight, as it remains the best positioned name in the industry. Pfizer ( PFE) and Bristol-Myers ( BMY) were upgraded from Underperform to Buy, Merrill Lynch said. Stocks have traded down and are flush with cash. Dividend yields are also very attractive. Merrill Lynch said it is downgrading UPS ( UPS) to Neutral from Buy and FedEx ( FDX) to Sell from Neutral. Cites weak demand and lower margins based on the global economic downturn and deteriorating freight environment. Midcap Bank estimates cut at Morgan Stanley. Estimates cut for 19 of 30 Midcap banks, Morgan Stanley said. Credit losses should mount, and the stocks are not discounting this yet. In-Line sector rating.