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Get Four
|  | JANUARY 21, 2004
 S&P STOCK PICKS & PANS S&P Downgrades Fannie Mae to Hold Also: analysts' opinions on J.P. Morgan and Advanced Micro Devices Fannie Mae (FNM ): Downgrades to 3 STARS (hold) from 4 STARS (accumulate) Analyst: Erik Eisenstein Fannie Mae posted fourth-quarter operating earnings per share of $1.77, vs. $1.66, a penny below S&P's estimate and 2 cents above the Street's estimate. A lower-than-expected loss on debt pre-payment nearly offset higher administrative expenses than S&P forecasted. S&P sees this trend for dominating in 2004 and is raising the operating earnings per share estimate by 6 cents, to $8.01. S&P expects meaningful mortgage portfolio growth to resume by the second quarter. S&P is leaving the 12-month target price at $79, however, given the greater-than-usual interest rate and political risk. With only moderate upside potential to S&P's target, S&P is taking a more cautious approach. J.P. Morgan (JPM ): Reiterates 4 STARS (accumulate) Analyst: Mark Morgan J.P. Morgan posted fourth-quarter earnings per share of 89 cents, vs. a loss of 20 cents, above S&P's 73 cents earnings per share estimate. Strong growth in investment banking, private equity, and service fees boosted revenues above S&P's forecast. Reserve releases added about 8 cents to earnings per share and expense control was improved. Given the expected dilution from J.P. Morgan's pending purchase of Bank One, subject to approvals, S&P says the earnings per share estimates stays at $3.00 for 2004 and $3.40 for 2005. S&P's 12-month target price is $44, based on shares trading at 13 times S&P's 2005 estimate, in line with the peer average, and reflecting a view that earnings will become less volatile. Advanced Micro Devices (AMD ): Maintains 4 STARS (accumulate) Analyst: Thomas Smith The chip maker posted fourth-quarter earnings per share of 9 cents, before a 3 cents gain on cost adjustment, vs. a loss of $2.49, above S&P's breakeven estimate. Revenue rose 76% year-over-year, and 26% quarter-over-quarter, reflecting strong sales for all chip lines and significant progress in flash memory. S&P is raising the 2004 earnings per share estimate to 55 cents, from 30 cents, and is upping the 2005 estimate to $1.25, from $1.00. However, AMD's capital spending is set to more than double in 2004, hurting the cash flow story even as earnings perk up. S&P's 12-month target price remains $22 based on a price-to-sales analysis.  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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