Saturday 6 November 2010

Stock Picks: First Solar, Merck, Microsoft

By Businessweek.com and Bloomberg News Staff


First Solar: Miller Tabak equity analyst Chris Kettenmann maintained a buy rating and $190 price target on shares of First Solar (FSLR), the world's biggest maker of solar power panels, on Oct. 29.


On Oct. 28, First Solar said third-quarter profit climbed 15 percent on higher sales in Germany and Canada. Net income rose to $176.8 million, or $2.04 a share, from $153.3 million, or $1.79 a share, a year earlier, the Tempe (Ariz.) company said in a statement. Profit was expected to be $1.69 a share, the average of 27 analysts' estimates compiled by Bloomberg. Sales increased to $797.9 million from $480.9 million.


The company said it foresees 2010 earnings per share (EPS) in a range of $7.50 to $7.65, vs. its previous forecast, issued in July, of $7.00 to $7.40,


First Solar plans nearly to double global production capacity to 2,700 megawatts in 2012, from about 1,400 megawatts this year, as its lowest-cost technology wins orders from Germany to Vietnam.


"First Solar appears well-positioned going into 2011, and we believe the company is poised for accelerated cost reductions from conversion efficiency gains," Kettenmann wrote in a note. "We believe management is telegraphing a meaningful increase of efficiencies at scale over 2011 with continued gains through yearend."


Kettenmann noted that the company is "upbeat" on North America market growth and "appears focused on further diversifying its end-market portfolio" away from Germany in 2011 and beyond, lowering risk from sales historically weighted to the German market. He said the company highlighted such emerging markets as Australia, India, and China on its earnings call as "significant new end markets with high growth potential."


Merck: Standard & Poor's equity analyst Herman Saftlas reiterated on Oct. 29 a buy rating and $42 price target on shares of Merck (MRK).


On Oct. 29, Merck, the second-largest U.S. drugmaker, reported third-quarter profit that rose more than analysts estimated as reduced costs helped overcome revenue losses from drugs facing generic competition.


Earnings, excluding a $950 million legal reserve for a Vioxx lawsuit and other one-time items, were 85¢ a share, beating by 2¢ the average estimate of 15 analysts surveyed by Bloomberg. Net income fell 90 percent, to $342 million, from acquisition costs and charges, the Whitehouse Station (N.J.) company said today in a statement.


Sales jumped 84 percent, to $11.1 billion, after adding products from its $49.6 billion acquisition of Schering-Plough last November. Merck said today that it's on track to cut 15,000 jobs from its combined workforce and close facilities to save $3.5 billion in annual costs by 2012.


Merck raised the lower end of its 2010 earnings forecast to $3.31 to $3.39 a share, excluding one-time items. The company previously said it anticipated profit of $3.29 to $3.39.


Merck lost exclusive rights this year to blood-pressure pills Cozaar and Hyzaar, whose combined 2009 sales were $3.6 billion. Sales of the two drugs declined to $423 million, from $861 million in the third quarter of last year. That compares with $387 million, the average estimate of three analysts surveyed by Bloomberg.


In a posting on the S&P MarketScope service, Saftlas noted that Merck's third-quarter EPS were 2¢ above his estimate. He said the top-performing drugs were asthma treatment Singulair, diabetes drugs Januvia and Janumet, and arthritis medication Remicade.

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