Thursday, March 4, 2010

Americas Equity Morning Summary 03.04.10 [morgan stanley] $YHOO

Companies Featured

Americas Equity Morning Summary

Economics Calendar
03/04: Productivity and Costs Productivity / Unit Labor Costs (Q4 revision), forecast: + 7.1 % / -6.0 %
03/04: Factory Orders (January), forecast: + 2.4 %
03/05: Employment Situation Nonfarm Payrolls / Unemployment Rate / Avg Hourly Earnings / Avg Workweek (February),
Forecast: -65,000 / 9.9 % / + 0.1 % / 33.8 hrs

Latin America Metals & Mining: Lifting Iron Ore and Coking Coal Price Assumptions; MMX to Overweight

Our commodities team has lifted its price forecasts for iron ore to up 60% in 2010 (vs. up 20%)
and up 20% in 2011. For coking coal, the team expects prices to increase to $202–222 in 2010,
vs. $175/t previously. We upgrade MMXM3 (R$12.96) to Overweight - we think the stock offers
attractive upside after underperforming iron ore prices in USD since their October 2009 bottom.
We reiterate our Overweight on VALE ($29.14) - we believe the shares are discounting a price
increase of only 40–45% in 2010, below the 60% we expect
. We remain Overweight TX ($35.90)
– we think its vertical integration should result in higher margins and that its true earnings power
is underappreciated by the market. We also adjust our earnings estimates and/or price targets for
GGBR (R$26.72), CSN (R$60.55) and USIM (R$51.50).

Business Services: Quick Comment: Education Hearings Reveal Flexibility on Gainful Employment

While we maintain our view that the regulatory environment remains difficult for the for-profit
education companies, stocks should respond positively to comments made by Arne Duncan, the
US Secretary of Education expressing potential flexibility on the proposed Gainful Employment
(GE) regulations.
While this gives a ray of hope for the bull case, we would be very surprised if the
Department of Education (ED) completely backs off the proposal and in our view, the overhang is
likely to remain for several months.

Americas Equity Morning Summary.

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