08/19/96 WATCH FOR CNS TO START SNORING

WATCH FOR CNS TO START SNORING

One New York money runner, who manages $400 million and makes sure he's fully invested in equities, seldom engages in short-selling. When he does, this money pro, who requests anonymity, has to feel that his case is airtight. He's shorting CNS (CNXS), which soared from 3 a share in 1994 to 25 by April, 1996, before easing to 18.
Sales of Breathe Right, which has turned into a near-wonder product, zoomed from $2.8 million in 1994 to $48.6 million in 1995. Breathe Right is a nasal strip to reduce, if not eliminate, snoring. Sales have been helped by some football players using the strip, thus attracting kids to the product.
CNS has become ``a perfect stock to short,'' says the investment manager. He feels the first-half results reveal dire prospects ahead: ``Earnings were headed in the wrong direction even as sales continued to climb,'' he explains. In the first half of the year, CNS posted operating earnings of $6.1 million, or 32 cents a share, down from $9 million, or 50 cents, a year ago. Sales, on the other hand, climbed to nearly $42 million from $26.3 million. In the second quarter ended June 30, 1996, operating earnings dropped to 15 cents a share, down from 37 cents a year ago.
``There is a big risk that the company won't hit the 77 cents the Street expects for all of 1996,'' he warns. When that happens, he says, expect the stock to head south--``down to 9, at best.''
Analysts remain bullish, however. For 1997, they project earnings of $1.07. The money manager, however, expects about 85 cents. Breathe Right, cleared by the Food & Drug Administration in 1993, is being sold worldwide by 3M. CNS chairman and CEO Daniel Cohen says second quarter earnings a year ago were helped by lower advertising expenses and tax-loss carryforwards, so comparisons with this year's second quarter were affected. But he's comfortable with the analysts estimates for 1996 and 1997. Breathe Right, he adds, has penetrated only 7%-8% of households that could use the product. He sees 1996 sales rising to $85 million to $90 million.
BY GENE G. MARCIAL