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Analyst Actions: Honeywell, Google, Zions Bancorp

October 20, 2008

STERNE AGREE CUTS HONEYWELL TO HOLD FROM BUY

Sterne Agree analyst Nicholas Heymann tells S&P MarketScope that Honeywell International’s (HON) third quarter EPS results were fine, but revenues missed. He says we’re facing a brutal “new world” environment where GDP could fall globally in 2009 due to the liquidity freeze.

Heymann says $3.20 2009 EPS estimate [down from $4.45] assumes 3.2% sales drop, due to large exposure to sharp decline in North American and European auto industry; accelerating cyclical decline in capex and residential and commercial spending; impact from recent commodity bubble.

He cuts $54 6-12 month price target to $25. He still thinks the company is solid and the liquidity freeze could start softening in the second half of 2009.

STIFEL REITERATES BUY ON GOOGLE

Stifel analyst George Askew says Google’s (GOOG) third quarter results are a welcome sight given the uncertainty that has enveloped the economy in general and advertising-driven business models in particular.

The highlights of the quarter include what he views as solid year-over-year growth in revenue, ex-TAC [+31%] and paid clicks [+18%], as well as improved year-over-year adjusted EBITDA margins [up 180 basis points], free cash flow margin [up 580 basis points] as operating, capital efficiency measures kicked in. He also notes that on the efficiency front, GOOG’s cost-cutting efforts are paying dividends.

Askew sees $19.48 2008 EPS and $23.10 for 2009. He has a $525 price target on the stock.

FBR CUTS ZIONS BANCORP TO MARKET PERFORM FROM OUTPERFORM

FBR analyst James Abbott says Zions Bancorporation’s (ZION) $0.31 third quarter GAAP EPS compares with $0.62 consensus and his $0.75. He notes, excluding the loss on derivatives [basis risk on swaps], securities gains/losses, normal tax rate, he calculates core EPS near $0.60.

Abbott downgrades the stock and cuts $43 price target to $33 as near-term credit trends, concerns on the company’s securities portfolio are likely to limit upside potential. He notes among the credit concerns is reserve/net charge-off ratio that is sub-2.0 times, raising the risk of larger reserve “rebuild” in coming quarters.

He cuts $3.05 2008 EPS estimate to $2.18 and $3.95 for 2009 to $1.00.




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