Hold-Rated Patni Ests Lowered

Zacks information technology analyst Abdul Saleh recommended a Hold rating to IT solutions provider Patni Computer Services Ltd. (PTI).  Here's what his latest update had to say:

'Patni reported its results for the third quarter of 2007 with in line revenues and earnings exceeding our estimates due to foreign exchange hedging gains. Excluding these items, PTI's earnings would have been below our estimates. We have lowered our revenue and earnings estimates for the remainder of 2007 and believe that the company has significant execution risks going forward, although it may continue to see a currency tailwind.

'While the company reported an in-line third quarter of 2007, we lowered our fourth quarter revenue expectations to $171 million, taking our full year 2007 revenue estimate to $660 million, down $3 million from our earlier projection of $663 million. For 2008, we have lowered our total revenue target to $759 million from our previous estimate of $763 million.

'Further, the earnings in the third quarter were higher than our estimates due to the hedging activities in the quarter, to offset the strong rupee. In view of this we have lowered our earnings estimate for the remainder of 2007 to $0.27 per ADR compared to our earlier estimate of $0.33, although we are maintaining our 2008 EPS estimate at $1.58.

'We project the pre-tax margin to fall by 130 basis points sequentially in 4Q07, excluding foreign exchange gains. Patni has not been able to grow to a scale reached by other comparable Indian IT companies and is yet to cross $1 billion in revenues and we believe that there is not much upside in the stock for the remainder of 2007. We continue to rate PTI a Hold and we have lowered our price target to $18.25 or 11.6x our 2008 earnings estimate of $1.58 per ADR.'

Maintaining a Hold on Chevron

The following excerpts explain why Zacks oil industry analyst Sheraz A. Mian remains neutral on Chevron Corporation (CVX), the large-cap integrated oil company:

'Chevron's second-quarter results came in weaker than expected, reflecting lower downstream results driven by much weaker refining margins. While Chevron no doubt has a fairly impressive inventory of upstream development projects that will drive volume gains and reserve additions in the long run, it does not compare favorably with its peers in the near- to medium-term.

'We have modestly raised our 2007 EPS estimate ($8.57 vs. $8.45) and kept our 2008 estimate unchanged. Our continued Hold recommendation for Chevron shares reflects the lack of near-term catalysts, in our view, that can aid valuation from current levels. While favorable movement on the commodity-price front will help the stock maintain its recent momentum, we see very limited fundamentals support for valuation, at least in the near-to-medium term.

'We believe that Chevron's attractive inventory of development opportunities and recent exploration successes are already priced in. Our unchanged $85 price objective is based on 10.0x our raised 2007 EPS estimate, in-line with its historical trading pattern relative to its peers. Our preferred names in this space remain Exxon (XOM) and ConocoPhillips (COP).'