|
|
During the past 20 years, the author has watch China move from being a developing country into an industrial superpower
Money Moves, 5/24: Chocomize Co-Founder Fabian Kaempfer talks with Bloomberg’s Deirdre Bolton about the business of customizing chocolate
The president's campaign has a new rule—no cell phones allowed
In honor of remote control inventor Eugene Polley, we recognize other influential but neglected inventors who have felt the sting of stolen glory
Forget Adderall. Traders now pop chia seeds to stay focused and energized
The Italian automaker and others are adding hybrid technology to elite cars
The storied bridge that links San Francisco and Marin County changed the face of California
Schools cultivate ties with startups before they're big successes
Dave McClure's traveling venture capital show scours the world for promising startups
Get Four
|  | JANUARY 10, 2005
Investors Should Study the STARS [Page 2 of 2] Q: A follow-up on international. Which Chinese companies are you interested in, if any? Let's settle for ADRs [American depositary receipts] here. A: We have only one stock that's an ADR/ADS that carries a 5-STAR ranking. That company is China Mobile Hong Kong (CHL ). On the 4-STAR side, just quickly scanning I find China Petroleum & Chemical (SNP ). Another 4-STAR is Chunghwa Telecom ADS (CHT ). Q: Your opinion, please, on Juniper Networks (JNPR )? A: S&P has a 3-STAR or hold ranking on JNPR shares. The company, which reported earnings of 10 cents per share in 2003, is expected to post earnings of 44 cents in 2004 and 63 cents in 2005. Our analyst believes while demand remains strong for some of Juniper's products, a shift toward higher-speed interfaces will begin to weaken the company's gross margin. Our 12-month price target for these volatile shares remains at $28. Q: How about the pharmas? Pfizer (PFE ) -- hold, buy, or sell? A: Pfizer, along with most of the major pharmaceuticals, is ranked hold. We think that growth in Pfizer's Lipitor and other drugs will help offset the likely significant erosion in Celebrex/Bextra. The company yields 2.8%, and we have a target price of $30. In general, we believe that weak pipelines and litigation overhangs will likely continue to exert pressure on these shares. As a result, we have a neutral investment outlook for the pharmaceutical industry. Q: Now what about Merck (MRK )? A: The MRK shares are also ranked 3-STARS. We see the company posting earnings of $2.62 for 2004, falling to $2.50 in 2005. We upgraded the Merck shares to hold from sell on Dec. 14, citing that despite the potentially significant Vioxx litigation, we believe MRK's strong financials, $14 billion in cash and investments, $6.6 billion in debt, and a projected '05 cash flow of $5 billion to be more than sufficient to fund its $1.52 dividend, which yields 5.2%. Q: Into a consumer area, thoughts on Chico's FAS (CHS )? A: We have a 4-STAR [buy] ranking on Chico's FAS. Fiscal 2004 [ended last January] earnings were $1.14 a share. We expect fiscal year '05 earnings to be $1.56, rising to $2 by fiscal year '06. We remain modestly optimistic on selected high-end retailers, even though some of the specialty apparel retailers saw modest traffic during the most recent holiday season. Chico's was one of the exceptions, and we believe the shares offer above-average price-appreciation potential. Q: And now to the Net -- how about eBay (EBAY )? Buy, sell, or hold? A: We have a 3-STAR ranking on eBay. We see earnings of $1.22 for 2004, rising to $1.59 by the end of 2005. Our neutral stance reflects our valuation concerns, as the eBay shares appear overvalued on both '05 p-e and p-e/projected growth ratios. Q: United Parcel Service (UPS ) has done well. Is it time to take profits? A: The UPS shares still carry a 5-STAR or best-buy ranking. The company is projected to post 2004 earnings of $2.95, rising to $3.40 by the end of 2005. Based on our belief that air freight and logistics demand will remain strong in 2005, we see the potential for p-e expansion of stocks in this industry. Our 12-month target is $107. Q: What's your take on shorting McDonald's (MCD ) or Tyson Foods (TSN )? A: The MCD shares are ranked 4-STARS [buy]. We see the company posting 2004 earnings of $1.91, rising to $1.97 in 2005. At 16 times '05 earnings, we believe the MCD shares are attractively valued, given our view of sales momentum and improving margins. The TSN shares are ranked 3-STARS [hold]. The company posted fiscal 2004 (ended September) earnings of $1.13. We see fiscal year '05 earnings reaching $1.35. Higher live cattle costs, lower capacity utilization, and decreased international sales continue to hurt the beef segment. However, we believe demand remains strong for pork, and pricing has improved within the chicken and prepared-food segments. Our 12-month price target is $18 for the TSN shares and $33 for the MCD shares. Q: Our first question on financial stocks -- thoughts on Commerce Bancorp (CBH )? A: We have a 5-STAR [best-buy] ranking on the CBH shares. Earnings are likely to come in at $3.24 for 2004, rising to $4 for 2005. Our '05 outlook for 7% to 9% [financial] group earnings growth is based on strong credit quality and improving capital markets. Risks, however, include an uncertain outlook for commercial lending and the yield curve. Q: How do I see the 5-STAR picks you're talking about? A: 5-STAR stocks are frequently discussed on BusinessWeek Online and are also made available in our flagship weekly publication, called The Outlook. Investors can subscribe to The Outlook by dialing 1-800-221-5277. They can also check their local library for this and other S&P products.
 Edited by Jack Dierdorff Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
 Copyright 2005, Bloomberg L.P.Terms of Use | Privacy Notice |
Printer-Friendly Version
