S&P Picks and Pans: Berkshire, DuPont, LabCorp, Marathon, Garmin

S&P MAINTAINS HOLD RECOMMENDATION ON CLASS A SHARES OF BERKSHIRE HATHAWAY

BRKA; $130900

A company insurance executive reportedly told CNBC that Berkshire might consider partnering with or acquiring another bond insurer. While we applaud the company's possible foray into the municipal bond insurance business amid favorable opportunities for a company like Berkshire with top-tier financial strength, we question the "buy" versus "build" logic. Still, news like this could buoy shares of MBIA (MBI) and Ambac Financial (ABK). Our $140,000 target price assumes Berkshire shares trade at 2.2X estimated 2008 tangible book, a premium to its insurance peers. /C. Seifert

S&P MAINTAINS HOLD OPINION ON SHARES OF DUPONT

DD; $44.89

DuPont updates fourth-quarter operating EPS guidance to about 50 cents vs. 45 cents, compared with our 48 cents estimate on strong business results and somewhat higher revenues than expected. It now sees full 2007 operating EPS of $3.20, at the top of its previous range, vs. year-ago $2.88. DuPont also raises its 2008 guidance by a few cents, in our view primarily to reflect the higher baseline in 2007. DD guidance for 2008 EPS is now 5%-11% higher that for 2007. We are keeping our 2008 estimate at $3.40, near low end on concerns about downturns in key U.S. markets, and our 12-month target price remains $52. /R. O'Reilly, CFA

S&P MAINTAINS STRONG BUY OPINION ON SHARES OF LABORATORY CORPORATION OF AMERICA

LH; $77.28

A recent investor presentation reinforced our view of LabCorp's continued solid sales growth, margin expansion and healthy cash flow generation. We project 2008 sales to rise 7% to $4.36 billion, EBITDA margins to increase 40 basis points to an industry-leading 27.0% and free cash flow of about $700 million. We also believe the recent extension of the Humana managed care contract should reduce some pricing pressure risk. LabCorp's stock buyback should also aid EPS growth with $698 million still remaining in the program as of Nov. 5, 2007. We see 2008 EPS of $4.15 and keep our 12-month target price of $90. /J. Loo, CFA

S&P DOWNGRADES RECOMMENDATION ON SHARES OF MARATHON OIL TO HOLD FROM BUY

MRO; $56.41

Marathon is set to report fourth-quarter results on January 31. Per an interim update, fourth-quarter production is expected to average 350,000 barrels of oil equivalent per day (boe/d), less than we expected and down 2.1% from 2006. Exploration costs are expected to near $200 million on one-time items, about double our forecasts. Based on revised projections, we are raising our 2007 operating EPS by 8 cents to $5.97, trimming 2008's by 13 cents to $4.68 and 2009's by 17 cents to $4.31. Blending discounted cash-flow (DCF) and relative valuations, we are cutting our 12-month target price by $9 to $61, an expected enterprise value of 6.4X our 2008 EBITDA estimate, a premium to peers. /T. Vital

S&P MAINTAINS BUY RECOMMENDATION ON SHARES OF GARMIN LTD.

GRMN; $70.94

Garmin shares have fallen about 37% in the past month on heightened investor concerns about price competition, in our opinion. However, we believe substantial rises in sales volume will continue to generate significant revenue growth and production economies of scale, driving strong EPS gains through 2008. Based on our view of increased price volatility, we are cutting our 12-month target price to $115 from $136. But with shares trading at a P/E of about 14X our 2008 EPS estimate, (and with excess cash) and incorporating our three-year EPS growth rate of 23%, we see Garmin as undervalued. /J. Peters, CFA

S&P DOWNGRADES AMERICAN DEPOSITARY SHARES OF BAYER AG TO HOLD FROM BUY

BAYRY; $94.47

We have raised our sales forecasts on Nexavar for kidney cancer to reflect the possibility of Bayer enjoying a favorable position against its competitor. We are also slightly trimming our selling, general, and administrative (SG&A) cost ratio for 2008, since we expect the Schering integration synergies to be ahead of schedule. We now see 2008 earnings per ADS of $5.16, raised from $5.06 partly on a weaker U.S. dollar. We increase our 12-month target price to $99 from $90 based on revised DCF and peer group multiples. Bayer's share price has risen 22% since Nov. 19, outperforming the S&P Euro 350 Index by 22%. /S. Matsubara