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To: Johnny Canuck who wrote (45107)	11/2/2008 11:10:00 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 71344

S&P Stock Picks and Pans October 31, 2008, 11:19AM EST S&P Picks and Pans: Electronic Arts, Chevron, KLA-Tencor, Bare Escentuals, McAfee Analysts' opinions on stocks in the news Friday From Standard & Poor's Equity Research Story Tools post a comment e-mail this story print this story order a reprint suggest a story digg this save to del.icio.us S&P REITERATES SELL RECOMMENDATION ON SHARES OF ELECTRONIC ARTS (ERTS; 27.73): September-quarter loss of $0.97, vs. loss of $0.61, is $0.57 wider than our loss estimate. Revenue rose 40% to $894 million, but were $34 million below our forecast; results were hurt by higher R&D and marketing expenses. Although the video game industry has been resilient in past recessions, ERTS is cautious about a weak Christmas shopping season, reflecting weak sales in October. We think the company also has execution issues, delaying the release of several titles. We are cutting our fiscal year 2009 (March) EPS estimate by $0.87 to loss of $0.75, fiscal year 2010's by $0.33 to $0.50 EPS, and our target price by $5 to $20. -J. Yin S&P REITERATES STRONG BUY RECOMMENDATION ON SHARES OF CHEVRON (CVX; 72.51): Our preliminary analysis indicates CVX posted third quarter EPS of $4.06, vs. $1.76, on higher oil and gas price realizations. Results excluded $0.20 of charges related to hurricane damage, and beat our estimate by $0.85. Oil & gas production declined by 5.7% to 2.443 MMboe/d on entitlement and hurricane impacts, but were above our expectations. Downstream refining & marketing earnings rose almost 5-fold on improved U.S. margins from the sale of refined products as oil prices declined, despite lower volumes on reduced demand. We will provide more detail after CVX's conference call. -T. Vital S&P REITERATES BUY RECOMMENDATION ON SHARES OF KLA-TENCOR (KLAC; 21.34): KLAC posts September-quarter operating EPS of $0.32, vs. $0.75, matching our estimate. Revenues fell 10% from the June quarter, on weak memory spending. Logic spending remained strong, representing 77% of orders, compared to only 16% for memory. We are encouraged by KLAC's plan to reduce operating expenses to $160-$175 million by the coming June quarter, lowering its quarterly breakeven revenue level to $350-$400 million. The company plans to reduce buybacks but maintains its dividend. We reduce our fiscal year 2009 (June) operating EPS estimate by $1.11 to $0.49, and our target price by $17 to $25, based on a price/sale above peers. -A. Zino-CFA S&P MAINTAINS BUY RECOMMENDATION ON SHARES OF BARE ESCENTUALS (BARE; 4.25): Third quarter EPS of $0.25, vs. $0.22, is $0.01 below our estimate. The shortfall came from weak sales, primarily in the Premium Wholesale and Home Shopping TV segments, with the latter adversely affected by the timing of a show on QVC. With BARE experiencing softening sales in the last six weeks, we are reducing our full-year 2008 EPS estimate by $0.07 to $1.06 and 2009's by $0.12 to $1.16. Given reductions in the EPS base, peer p-e multiples and our 3-year growth rate for BARE (to 10% from 16%), we lower our p-e and p-e-to-growth-based 12-month target price by $3.50 to $7.50. -L. Braverman-CFA S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF MCAFEE INC (MFE; 30.00): Third quarter operating EPS of $0.39, vs. $0.34, is $0.03 higher than our estimate, as revenue rose 27% to $410 million, $35 million above our forecast. MFE cites strength in all geographical regions, corporate and consumer markets, and we think it is gaining marketshare with its comprehensive solutions. Although we believe the security segment is more resistant to a slowdown in IT spending than other software, we see MFE revenue growth rate moderating in 2009. We raise our 2008 EPS projection by $0.06 to $1.63, but trim 2009's by $0.06 to $1.64 and our target price by $5 to $36 on our lower growth outlook. -J. Yin