Analyst Actions: Merrill Lynch, Amgen, Harmonic

OPPENHEIMER CUTS ESTIMATES FOR MERRILL LYNCH

Oppenheimer analyst Meredith Whitney says Merrill Lynch (MER) announced $8.5 billion equity raise and “substantial sale of U.S. ABS CDOs” that would reduce its CDO exposure by $11.1 billion.

She says while MER has significantly diluted existing shareholders, she applauds this purging of assets as an attempt to cut its losses, focus on stabilizing its platform, and righting the franchise towards growth.

Whitney notes MER’s stock still sells at premium to book value, but thinks the stock getting closer to fairly valued levels as now the hardest work is behind the company. She widens her 2008 loss per share view to $10.50 from $8.37 loss [vs. $6.75 consensus loss estimate]; she cuts 2009 EPS to $1.27 from $1.75 [vs. $3.66 consensus]. She keeps underperform opinion on the shares.

CITIGROUP UPGRADES TO AMGEN BUY FROM HOLD

Citigroup analyst Yaron Werber says Amgen’s (AMGN) $1.14 second quarter EPS topped his $1.09 estimate and consensus $1.01 on strong revenues.

Werber says the company’s bullish comments on the second quarter results have given him conviction that denosumab [dmab] Phase 3 data will be competitive with generic alendronate as it offers equivalent efficacy, clean side effect profile, better convenience/tolerability, and novel mode of action. He notes full data will be presented in September. He says dmab could be a blockbuster [$3-$5 billion globally in osteoporosis, $2-$4 billion in cancer] when launched in the first half of 2010; this could lift AMGN’s long-term growth rate as the rest of the pharma industry is maturing.

He raises $4.27 2008 EPS estimate to $4.42, $4.51 for 2009 to $4.67; and $50 price target to $75.

MERRILL DOWNGRADES HARMONIC TO NEUTRAL FROM BUY

Merrill Lynch analyst Vivek Arya says Harmonic’s (HLIT) second quarter sales of $89.3 million grew 25% year-over-year, above his $89.2 million and the Street’s $87.4 million estimates, mainly on strength in cable edge upgrades. But he notes satellite sales declined 44% quarter-to-quarter, which HLIT attributed to lumpiness.

Arya says lower financial income, slightly higher operating expense drove EPS to $0.16, $0.01 below his and Street expectations. He notes $175-$185 million second half sales guidance is below his and Street’s $188 million forecast, and implies negligible 1%-2% h/h sales growth. Also notes company’s 15%-17% second half EBIT forecast implies no incremental leverage from the first half.

He cuts $0.72 pro forma 2008 EPS estimate to $0.66 and $0.55 for 2009 to $0.54. He cuts $11 price target to $10.