Here’s a closer look at investment banking analysts’ latest stock notes today:
- DEUTSCHE BANK: Hold to Buy, E95 to E110. Nuclear tragedy unfolding in Japan is a game changer. Nuclear is used for base load and the only viable replacements are gas (likely) and coal (less likely). Siemens is well positioned to benefit from rising investment in non-nuclear power generation.
- DEUTSCHE BANK: Robust 5-year growth targets driven by innovation. Reiterate Buy. While we do not believe 3M’s investor meeting changed any views amongst 3M’s naysayers, the meeting was nonetheless positive with a solid Q1 update thru last Thursday, the situation in Japan (9% of sales) negative in the short-term but positive longer-term as rebuilding takes hold and clear evidence of management’s growing confidence in its innovation driven growth strategy (robust 5-yr growth targets). With innovation “on fire” (new products 31% of sales in ’10, the highest in its history, vs 21% in ’05), and valuation an attractive 14.5x ’11E EPS, Buy.
- UBS: Valuation: Maintain $103 price target and Buy rating Our PT reflects a 20% premium to the market multiple on our 2011 EPS estimate.
JANUS CAPITAL GROUP (NYSE:JNS)
- CITI: Upgrade to Hold from Sell; maintain $12 target — With the stock down 15% since mid-January, lagging the SPX by ~1,200 bps and peers by ~1,000 bps , we see the risk/reward more balanced. We also believe investors are asymmetrically discounting a “worst case” scenario for performance fees which, based on our analysis, seems extreme given AUM mix/performance metrics.
DISCOVER FINANCIAL SERVICES (NYSE:DFS)
- CITI: Q1 Estimate — We are raising our Q1 est to $0.60 (ex any one-time STU deal exp) to reflect better credit (consensus is $0.51). And we believe core Q1 EPS has risk to the upside on a better reserve release. Key themes to watch include loan growth outlook, yields, STU impact and card network initiatives. DFS reports earnings on Mar 22 and has their investor day on Mar 23. At the investor day, we expect a bullish tone from mgt, with a detailed discussion on student lending. We wouldn’t be surprised to see mgt raise the normalized ROA guidance ~50 bps from their previous 2.5-3% range to reflect lower normalized credit losses potentially offset by higher marketing.
- CITI: On Thursday, GM suspended production at its Shreveport, Louisiana assembly plant due to a parts shortage related to Japan. The plant, which produces the Chevy Colorado and GMC Canyon pickup trucks, accounts for ~1.7% of GMNA production. GM opted not to disclose the nature of the parts shortage. The timing of the shut-down was surprising after GM’s competitors earlier in the week alluded to a 30-50 days’ stock cushion at their North America facilities. However, the Shreveport plant is unique in that it traces its history to GM’s past ties with Isuzu, who helped design the Colorado/Canyon years ago (GM sold its last Isuzu stake in 2006).
- CITI: Despite trimming our 1Q JPM est’s 8%, we remain ~15% above consensus for JPM, which trades at 9.1x and 7.7x our 11/12 est’s (vs 12x and 10x for large peers). We see good value here and view earnings and Fed stress test results as potential near-term catalysts.
- MORGAN STANLEY: While the 4Q10 results were largely in line with our estimates, we have reduced our 2011 estimate to reflect management’s lower guidance inclusive of Sonic. We have decreased our estimate of connected device shipments in 2011 and decreased DivX estimates in final pro forma results, driving lower CE segment revenues. Additionally, we have adjusted our model for higher 2011e interest expense given Rovi’s upsized term loan. Thus, our 2011 and 2012 EPS estimates, pro forma for a full year of Sonic and Div-X estimates, have decreased by 8-11% to $2.47 and $2.86, respectively. We have also reduced our price target to $59.