S&P Picks and Pans: BBBY, Regions, Beazer, Southern Co.

S&P REITERATES BUY RECOMMENDATION ON SHARES OF BED BATH & BEYOND

BBBY; $24.85

Excluding a one-time benefit, November-quarter EPS of 49 cents vs. 50 cents is 3 cents shy of our estimate. Comp-store sales increased just 0.8%, highlighting the challenging macro environment for home-related retailers, and we think continued promotional activity will adversely affect near-term results. We are lowering our fiscal 2008 (Feb.) and fiscal 2009 operating EPS estimates to $2.07 and $2.32 from $2.20 and $2.52. We are also cutting our discounted cash-flow (DCF)-based target price by $6 to $38. However, we think BBBY shares are attractive at under 11X our fiscal 2009 EPS estimate and at a ratio of P/E-to-growth (PEG) under 0.9X. /M. Souers

S&P MAINTAINS HOLD OPINION ON SHARES OF REGIONS FINANCIAL

RF; $21.83

Regions says it will take loan provisions of $360 million in the fourth quarter, vs. third quarter's $90 million, since it expects chargeoffs to rise to 0.46% of average loans vs. 0.27% in third quarter. It cites deterioration of home builder loans (8% of Regions' loan portfolio). The company also expects to take $131 million in charges for valuation writedowns. As a result, we are cutting our 2007 EPS estimate by 40 cents to $2.30, and reducing our 2008's by 18 cents to $2.63 on the expectation of rising chargeoffs. We are also reducing our target price $4 to $25, 9.5X our 2008 estimate, a discount to Regions' historical levels. /S. Plesser

S&P REITERATES SELL OPINION ON SHARES OF BEAZER HOMES USA

BZH; $6.86

Beazer has not filed its fiscal 2007 (Sep.) 10-K report or its 10-Q report for June-quarter fiscal 2007 due to accounting issues. Absent a fiscal 2007 balance sheet, we are concerned that reported inventory may be overstated to current market conditions as it relates to asset impairments. Despite $230 million in write-downs in Beazer's preliminary unaudited financial release for September-quarter, we believe the company is exposed to more asset impairments in December-quarter due to its weaker position as a small homebuilder. Applying a target-price-to-book value of 0.2X, lowest of peers, we are reducing our target price to $6 from $9. /K. Leon, CPA

S&P REITERATES BUY OPINION ON SHARES OF SEALED AIR

SEE; $21.89

We project at least 5% organic sales growth in 2008, driven by demand for new food products in Latin America and the Asia/Pacific region. We think pricing initiatives, a better product mix, supply chain efficiencies and global manufacturing strategies will benefit margins and offset volatile resin-based raw material costs. Blending our relative and DCF-based metrics, we now believe the stock deserves a P/E of 14X our $1.85 2008 EPS projection, modestly above peers but slightly below the S&P 500, and we lower our 12-month target price by $3 to $26. /S. Scharf

S&P DOWNGRADES OPINION ON SHARES OF SOUTHERN COMPANY TO HOLD FROM BUY

SO; $38.37

Given the recent rise in the price of Southern Co. shares, we expect a lower rate of total return from the current level. We are raising our fourth-quarter and 2007 estimates by one cent each to 23 cents and $2.10, respectively. We are also reducing our 2008 estimate by one cent to $2.30. A recent rate case ruling in Georgia increased base rates by $99.7 million and will allow for recovery of $222 million a year for environmental investments. We are raising our 12-month target price by $2 to $41, a premium-to-peers P/E of 17.8X applied to our 2008 estimate. /J. McCann

S&P REITERATES BUY OPINION ON SHARES OF WASTE MANAGEMENT

WMI; $32.00

We project 3% organic revenue growth for Waste Management in 2008, as collecting and landfill price hikes offset further weakness in volume. Margins should widen on cost control strategies, while Waste Management continues to divest underperforming assets. Strong cash generation will likely be targeted for more share buybacks, debt paydowns, dividends, and niche acquisitions. Waste Management also offers a dividend yield of 3.0%, compared with 1.9% for the S&P 500. Blending relative and DCF metrics, we use a near-peer P/E of about 16.5X our $2.30 2008 EPS estimate, and reduce our target price by $4, to $38. /S. Scharf