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Get Four
|  | FEBRUARY 23, 2005
 S&P STOCK PICKS & PANS S&P Raises Autodesk to Hold Analyst Jonathan Rudy also boosted his target price on the software outfit. Plus: Opinions on Intel, Lowe's, Martha Stewart, and more Autodesk (ADSK ): Upgrades to 3 STARS (hold) from 2 STARS (sell) Analyst: Jonathan Rudy, CFA Autodesk posted January-quarter operating EPS of 30 cents, vs. 22 cents one year earlier, excluding a restructuring charge, 4 cents better than our estimate. Revenues of $356 million also beat our estimate. The company noted particular strength in its 3D products, which grew 49%, and its subscription revenues, which rose 54%. We are raising our fiscal 2006 (ending January) operating EPS estimate to $1.05 from $1.04. As the company has over $530 million in cash and investments, which is over $2.10 per share, with no debt, and the shares trade in line with the company's peers on a p-e-to-growth basis, we would hold the stock. We are raising our 12-month target price to $32 from $28. Intel (INTC ): Reiterates 3 STARS (hold) Analyst: Amrit Tewary During a technology conference, Intel CFO Andy Bryant said he does not believe a large acquisition makes sense for the company at this time. We believe this should put to rest speculation that Intel has been looking to get in the market to buy a particular large chip company with significant expertise with communications-related products. But, we do expect Intel to pursue one or more smaller acquisitions over the next 12 months, in order to gain a larger foothold in the communications market. We think small, targeted acquisitions would likely result in less integration risk for the company. Lowe's Cos. (LOW ): Reiterates 4 STARS (buy) Analyst: Michael Souers Lowe's posted January-quarter EPS of 64 cents, vs. 50 cents one year earlier, 4 cents higher than our estimate. Total sales growth of 18%, including 6.9% higher same-store-sales, factored largely in the strong earnings results. However, Lowe's EPS outlook for fiscal 2006 (ending January) was disappointing to us, as the company guided EPS to $3.25-$3.34 and, in our opinion, the shares are trading lower today as a result. We are lowering our fiscal 2006 EPS estimate to $3.34, the high end of guidance, from $3.39, and are introducing our fiscal 2007 estimate of $3.85. Our 12-month target price, based on discounted cash flow analysis, remains $65. Martha Stewart Living (MSO ): Reiterates 2 STARS (sell) Analyst: Gary McDaniel A fourth-quarter loss of 15 cents vs. 5 cents earnings per share is 6 cents better than our estimate on a higher-than-expected tax benefit and revenues. We are widening our 2005 loss estimate to 63 cents from 30 cents, based on higher expenses and larger-than-expected advertising and circulation declines at the flagship magazine. Although we believe a turnaround will begin in the second half of 2005, we continue to view the shares as overvalued. We are reducing our 12-month target price to $25 from $30. Our target price is based on a median multiple of 19.4 times applied to our 2006 EBITDA estimate. Cablevision Systems (CVC ): Reiterates 3 STARS (hold) Analyst: Tuna Amobi, CPA, CFA Before net non-operating charges we estimate at 79 cents, CVC's fourth-quarter loss of 27 cents, vs. a 37-cent loss is 3 cents wider than our loss estimate and 7 cents narrower than the Street's. But, we think triple-play promotion is strongly impacting the underlying metrics for core video, data and digital phone. Cablevision guides for 2005 mid-teens revenue and EBITDA growth at its cable division, with 1.0% to 1.25% revenue-generating unit net adds (basic, 1.5% to 2.0%). At the morning call, Cablevision should address questions on DBS shutdown and strategic restructuring of program interest jointly held with News Corp. Ciena Corp. (CIEN ): Maintains 3 STARS (hold) Analyst: Kenneth Leon, CPA Ciena posted a January-quarter loss of 7 cents, vs. a 15-cent loss, before special items, 2 cents wider than our loss estimate. Sales rose 16% sequentially vs. as Ciena increased sales from data and core optical networking. This better-than-expected sales growth pressured gross margins for products, which fell 500 basis points to 26.1%. While we see a 41% sales gain in fiscal 2005 (ending October), we do not see profitability given Ciena's high operating costs. We are widening our fiscal 2005 loss estimate to 20 cents from 15 cents, and fiscal 2006's loss to 15 cents from 10 cents. Priced below peers at 1 time book value, we would hold Ciena. Conagra Foods (CAG ): Maintains 3 STARS (hold) Analyst: Rick Joy Conagra says that it expects weak results for its refrigerated branded meat operations and transition costs for a new enterprise software system to negatively affect its February-quarter by 10 cents per share. We expect issues to extend beyond current quarter, and are reducing our fiscal 2005 (ending May) earnings per share estimate by 13 cents to $1.46, and our fiscal 2006 earnings per share estimate by 10 cents to $1.60. Despite this reduction in near-term earnings expectations, we would hold shares given strong cash flows, potential for cost structure improvements and 3.8% dividend yield. Our 12-month target price stays at $29. Chico's Fashions (CHS ): Maintains 4 STARS (buy) Analyst: Marilyn Driscoll, CFA Chico's shares split 2-for-1 today. We adjust our 12-month target price to $33 from $65 and our fiscal 2005 (ending January) and fiscal 2006 earnings per share estimates to 78 cents and $1.00, respectively, from $1.56 and $2.00. Chico's reports January-quarter results March 2, when we look for earnings per share up 20% to 18 cents. We project 26% average annual earnings growth over the next five years as Chico's penetrates the intimate apparel market via its Soma by Chico's retail concept and grows its WhiteHouse/BlackMarket via store expansion and The Black Book loyalty program, and further penetrates the baby boomer casual apparel market with Chico's.  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.
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