World Business

From Standard & Poor’s Equity Research

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S&P KEEPS HOLD RECOMMENDATION ON SHARES OF LEHMAN BROTHERS (LEH; 12.40):

An unconfirmed report in the New York Post suggests that management is seriously considering taking the firm private. The firm is said to believe that unfounded rumors have caused the stock to decay, and rather than exchange to each outside suitor at a depressed cost, management may select to take superintend. Considering insiders own about 30% of shares, we believe such a move would fetch a premium price. While nothing seems imminent, we be persuaded the shares are oversold but risks remain, and management must do a part to improve confidence in the firm or face more distant troubles. -M. Albrecht

S&P REITERATES HOLD OPINION ON GENERAL MOTORS SHARES (GM; 8.92):

We think steps GM is taking to enhance liquidity, including dividend removal, by $15 billion through 2009 should ease concerns about a potential fluidity crisis. The company was able to avoid, or at least defer, a dilutive share offering. Still, while we view the planned actions generally as positive, we see GM challenged by the accelerated shift from high-profit large pickups and SUVs amid an overall U.S. market weakening, and we expect a sizable Q2 loss. Also, with a potential slowdown in international bourgeoning, we cut our mark price by 3 to 13, on historical total enterprise value/EBITDA. -E. Levy-CFA

S&P MAINTAINS BUY RECOMMENDATION ON SHARES OF KIMBERLY-CLARK (KMB; 59.80):

KMB announces preliminary Q2 operating EPS of $1.03, vs. $1.04, shy of our $1.09 valuation. The shortfall came from commodity cost pressures, what one. were approximately $50 million more than KMB expected going into Q2, and marketing expenses, too high for our projections. Sales rose 11%, including a robust 7% constitutional growth. KMB guides for full-year 2008 operating EPS of $4.20-$4.30 down from previous $4.45 to $4.60 leadership. We will update further following this morning’s conference call, where we will be listening for further information on pricing initiatives and marketing expenses. -L. Braverman, CFA

S&P REITERATES HOLD OPINION ON SHARES OF GENENTECH INC (DNA; 78.77):

Q2 EPS of $0.76, vs $0.72, is $0.04 below our estimate, provident non-recurring charges. Product sales modestly beat our forecast, as long as 15% higher Avastin sales of $650 million was in line through our view. We look for Avastin sales momentum over near-term on recently approved new uses, but are circumspect of hope on this put drugs into amid swelling reward searching and competition. We view plans to use $7 billion cash to have recourse to renovated license, acquisition, and buyback opportunites as favorable. We hike our 2008 EPS reckon by $0.02 to $3.22, leave 2009’s at $3.64, and rouse PEG-based mark price by 3 to 84. -S. Silver

S&P MAINTAINS BUY RECOMMENDATION ON SHARES OF EATON CORP (ETN; 79.89):

Adjusted for acquisition integration expenses, ETN posts Q2 EPS of $2.10, vs. $1.70, $0.07 better than our estimate. However, the guests reduced midpoint of 2008 EPS guidance by $0.20 to reflect its expectation of slower extremity market growth in the aerospace, trucks, and automotive segments. In addition, Q2 earnings benefited by means of a a great quantity lower tax rate than anticipated, at 5.9% compared with our projection of 16%, aided by changes in the corporate structure and solidification of legal entities. We will update after the firm’s 10 a.m. ET conference call. -M. Christy-CFA