S&P CAPITAL IQ
JUNE 23, 2014
S&P Capital IQ’s
GLOBAL MARKETS INTELLIGENCE
John Hackett, Robin Mordfin
RESEARCH & ANALYTICS
Director, Global Equity Research
Managing Director, U.S. Equity Strategy
Sam StovallFor customer service, please call
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S&P CAPITAL IQ EVALUATION SYMBOLS
Our evaluation of the 12-month potential of stocks is indicated by STARS:
—Total return is expected to outperform the total return of a relevant benchmark by a wide margin over the coming 12 months, with shares ris-ing in price on an absolute basis.
—Total return is expected to outperform the total return of a relevant benchmark over the coming 12 months, with shares rising in price on an absolute basis.
—Total return is expected to closely approximate the total return of a relevant benchmark over the coming 12 months, with shares generally rising in price on an absolute basis.
—Total return is expected to underperform the total return of a relevant benchmark over the coming 12 months, and the share price is not anticipated to show a gain.
—Total return is expected to underper-form the total return of a relevant benchmark by a wide margin over the coming 12 months, with shares falling in price on an absolute basis.
Quality & Fair Value Rankings
Our appraisals of the growth and stability of earnings and dividends over the past 10 years for STARS and other companies are indi-cated by Quality Rankings:
Not RankedQuality Rankings are not intended to predict stock price movements.S&P Fair Value Rank: Using S&P’s exclusive proprietary quantita-tive model, stocks are ranked in one of ﬁve groups, ranging from Group 5, listing the most undervalued stocks, to Group 1, the most overvalued issues. Group 5 stocks are expected to generally out-perform all others. The Fair Value rankings imply the following: 5-Stock is signiﬁcantly undervalued; 4-Stock is moderately undervalued; 3-Stock is fairly valued; 2-Stock is modestly over-valued; 1-Stock is signiﬁcantly overvalued. As an input to the S&P Mutual Fund Ranking, S&P evaluates the weighted average Fair Value Rank of the underlying holdings of the mutual fund com-pared with its category.
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Covidien (COV 91.24
) was deleted from the Platinum portfolio effective June 16, 2014.
FRANCE APPROVES GE DEAL WITH ALSTOM:
The French government has backed General Electric’s (GE 26.93
) revised proposal to acquire certain assets and form joint ventures related to other assets with Alstom, a French multina-tional company with interests in the electricity generation and rail transport markets. “This approval makes it likely the deal with Alstom, will go ahead,” says S&P Capital IQ Equity Analyst Jim Corridore. Under the new proposal, GE will create 50:50 joint ventures with Alstom on its grid energy and renewables busi-nesses. “Overall, we would be favorable on the deal, which we think accelerates GE’s transition to a much more industrial focused company as it intends to transition away from its finance business,” says Corridore. “We see significant synergy and cross selling potential. Though this would be the largest deal in GE’s history, we think the company has a successful track record with large deals.”
AETNA GROWTH PREDICTED:
S&P Capital IQ raised its target price on Aetna (AET 81.41
) by $12 to $98 or 15 times S&P’s 2014 EPS estimate, which is slightly above peers and historical levels. According to S&P Capital IQ Equity Analyst Jeffrey Loo, “we see AET growing faster than its peers, driven by its Coventry acquisition and a healthy rise in membership, mainly in commercial and government businesses, and by new contract wins.” Loo adds that though Aetna limited its participation in the healthcare exchanges, “we still see benefits from the better-than-expected enrollment of eight million Americans in the exchanges and by the five million new Medicaid enrollees.” Finally, says Loo, “Aetna’s cost controls should enable a healthy EPS rise in spite of the new tax.”
INTEL SEEN AIDED BY PC SALES:
S&P Capital IQ maintains its buy recommendation on shares of Intel (INTC 30.09
), and raises its 2014 operating EPS estimate by $0.17 to $2.04 and 2015’s by $0.12 to $2.14. “We up our 12-month target price by $4 to $34, on higher revised P/E near peers,” says S&P Capital IQ Equity Analyst Angelo Zino. Indications of improved pros-pects for sales of personal computers bode well for the company. “We believe that INTC is benefiting from PC stabilization in the more mature U.S./Europe markets, which is driving sales/earnings growth,” says Zino. Meanwhile, S&P Capital IQ believes that Intel “will also see multiples expand and trade closer to other semiconductor companies given an improving PC outlook and our view that it will witness greater momentum for its foundry/mobility businesses,” says Zino.
KORN/FERRY GROWTH SEEN:
S&P Capital IQ maintains its 12-month target price of $36 on Korn/Ferry (KFY 29
), applying a P/E of 21 times, at the mid-point of its three-year range, to S&P Capital’s fiscal year 2015 (Apr.) EPS estimate of $1.73. S&P Capital IQ Equity Analyst Joseph Agnese says, “we are initiating fiscal year 2016 EPS of $1.99. Apr-Q adjusted EPS of $0.43 vs. $0.32 is $0.05 above our estimate.” Results benefited from strong growth across all business segments. “However, we expect margin expansion in FY ‘15 to be limited by increased expenses,” says Agnese.
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