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Get Four
|  | DECEMBER 16, 2003
 S&P STOCK PICKS & PANS S&P Says Buy Lennar Also: analysts' opinions on Sprint and Motorola. Plus more... Lennar (LEN ): Maintains 5 STARS (buy) Analyst: Michael Jaffe Homebuilder Lennar posted November-quarter earnings per share of $3.38, vs. $2.87, beating S&P's forecast by 26 cents. Gains reflected 14% more home closings, wider margins, and a big gain in land sales. With the backlog rising 21% to $3.9 billion, Lennar hiked its fiscal 2004 (Nov.) earnings per share guidance to $10.50, from $9.50. S&P is raising the fiscal 2004 estimate to $10.75, from $9.80, and sees $12.15 in fiscal 2005. S&P's outlook reflects a forecast of low mortgage rates through 2006, and a positive view of Lennar's dual marketing plan and its main geographic markets. S&P thinks Lennar is undervalued at 8 times the fiscal 2004 estimate, slightly below its peers. Sprint (FON ): Maintains 2 STARS (avoid) Analyst: Todd Rosenbluth S&P is modestly encouraged that the long-distance carrier reiterated its earnings per share guidance before a host of charges for 2003. However, S&P believes the 7% revenue decline that Sprint expects shows the challenges the wireline company faces from increased competition and pricing pressure. S&P sees operating earnings per share of $1.43 in 2003, and $1.31 in 2004. As in prior years, Sprint is taking sizable fourth-quarter charges for billing and workforce changes, causing more earnings quality concerns. Also, S&P thinks a recombination with Sprint PCS is still possible in mid-2004. With Sprint priced above peers, S&P would avoid. Motorola (MOT ): Maintains 3 STARS (hold) Analyst: Kenneth Leon S&P thinks the hiring of Edward Zander to succeed Chris Galvin as chairman and CEO should move the shares higher. S&P believes Zander, a former executive of Sun Microsystems, brings strong credentials in operations, which is needed at Motorola. S&P expects the planned initial public offering of the chip business in late March to give further upside to the shares. With a target price of $15 based on a sum-of-the-parts analysis, and with shares trading below peers at 1.2 times S&P's 2004 estimate, S&P would hold Motorola on favorable potential catalysts ahead. Amgen (AMGN ): Downgrades to 4 STARS (accumulate) from 5 STARS (buy) Analyst: Frank DiLorenzo Amgen provided disappointing 2004 guidance, forecasting earnings per share at $2.30 to $2.40, below S&P's prior $2.50 estimate. The drug maker isn't keeping its promise for lower capital spending in 2004. Despite a share-repurchase plan, S&P is concerned about very high option issuance. Also, Amgen's pipeline issues still haven't been addressed. However, on a valuation basis, S&P thinks the shares are still attractive. As a result of Amgen's new guidance, S&P is lowering the 2003 earnings per share estimates to $1.93 from $1.95; cutting the 2004 esitmate to $2.36, from $2.50; and trimming the 2005 estimate to $2.91, from $3.05. Based on lower growth assumed in S&P's discounted cash-flow model, S&P also is cutting the target price to $75, from $92. Oracle (ORCL ): Maintains 3 STARS (hold) Analyst: Jonathan Rudy Database-software giant Oracle posted November-quarter earnings per share of 12 cents, vs. 10 cents, a penny better than S&P's estimate. Revenues rose 8% and were also better than S&P's forecast, however, results benefitted from a significant foreign-exchange impact and a lower-than-expected tax rate. Operating margin widened to 37%, from 34%. S&P is raising the fiscal 2004 (May) earnings per share estimate to 47 cents, from 46 cents, and sees 52 cents in fiscal 2005. Despite solid results, S&P wouldn't add to positions with shares trading at a premium to peers on a price-to-sales basis, and with an outstanding hostile tender offer for rival PeopleSoft. Medtronic (MDT ): Reiterates 5 STARS (buy) Analyst: Robert Gold In a mid-quarter financial guidance call, the medical-device maker reiterated its guidance of fiscal 2004 (Apr.) third-quarter earnings per share of 41 cents, as its upwardly revised revenue target is offset by costs tied to foreign-exchange hedging. S&P is boosting the revenue estimate by $48 million, to $2.23 billion. Also, S&P is encouraged by Medtronic's progress in the cardiac-rhythm management, spine, diabetes, and vascular areas. But the absence of margin expansion leads S&P to trim its earnings per share estimate by a penny, to 41 cents, bringing S&P's full fiscal 2004 estimate to $1.62. S&P stills project a 17% three-year growth rate and has a 12-month target price of $57.  All of the views expressed in this research report accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of analyst compensation was, is or will be, directly or indirectly related to the specific recommendations or views expressed in this research report. Standard & Poor's Regulatory Disclosure Any advice, analysis, or recommendations contained in articles labeled "Insight from Standard & Poor's" reflect the views of Standard & Poor's, which operates separately from and independently of BusinessWeek Online. It is possible that BWOL may from time to time publish information that is not consistent with advice, analysis, or recommendations that are published by Standard & Poor's. Standard & Poor's and BusinessWeek Online are each units of The McGraw-Hill Companies, Inc.
BW MALL
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