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Wyeth (WYE
): Upgraded to 5 STARS (buy) from 3 STARS (hold) Analyst: Herman Saftlas
Total prescriptions written for Wyeth's Premarin and Prempro female hormone replacement therapies appear to have stabilized, following a sharp falloff last month triggered by side-effect worries. Wyeth's sales of these therapies are likely to drop 15%-20% in 2002. But they should stabilize at a $1.4 billion annual franchise over 2003-2005. We continue to see robust growth in newer drugs like Prevnar, Enbrel, Effexor, and Refacto. The company's product pipeline includes drugs and vaccines for infections, cancer, and other conditions. The shares trade at a discount to those of the company's peers on both a p-e and price-to-sales basis.
Banknorth Group (BKNG
): Still 5 STARS (buy) Analyst: Evan Momios
The company continues its expansion in Connecticut with the acquisition of American Financial Holdings for $709.3 million in cash and stock. The transaction, which is expected to close in the 2003 first quarter, should be accretive to 2003 EPS and should strengthen BankNorth's asset quality. Pro-forma, assets will go to over $26.0 billion from $21.3 billion, and the company's market share ranking climbs to the fifth spot from today's 14th in the state with second highest per capita income in the U.S. We are raising our 2003 EPS estimate to $2.28 from $2.25.
Staples agreed to acquire Guibert's European mail order business for 825 million euros. The company sees a neutral impact on fiscal 2003 (ending January) EPS and $0.02 fiscal 2004 accretion. The deal should increase its Europe business by 50% and offer key long-term synergies as Staples duels industry leader Office Depot. At 15-16 times EBIDTA, consideration is in range of recent deals. But with the funding mix yet to be disclosed and the company's fiscal 2003 cahs flow likely only about $250 million, we are wary of EPS dilution or overly high leverage. Hold Staples at 17 times our $0.83 FY 03 EPS estimate, vs. S&P 500's 20x.
Borders Group (BGP
): Reaffirms 4 STARS (accumulate) Analyst: William Donald
The company's second-quarter EPS of $0.04 is at the top of its guidance range, vs. year-ago breakeven. Total sales rose 3.2%, with a 1.0% slide in superstore comparable-store sales, as expected. Borders said gross margin and expense management will aid results even if the current soft sales environment continues throughout the second half. The company is poised for solid gains when book-buying picks up. We are shaving $0.02 from our fiscal 2003 (ending January) estimate, to $1.51, up 14% from the $1.32 of fiscal 2002; we expect a nearly 16% advance to $1.74 for fiscal 2004. The inclusion of option expense would have decreased fiscal 2002 EPS by $0.08.
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