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Get Four
|  | MAY 27, 2005
 S&P STOCK PICKS & PANS S&P Keeps Hold on Computer AssociatesPlus analysts' opinions on Pfizer, TiVo, and moreComputer Associates (CA ): Reiterates 3 STARS (hold) Analyst: Zaineb Bokhari Computer Associates posted March-quarter operating earnings per share of 20 cents, vs. 18 cents, in line with our forecast. Revenues grew 7% to $910 million, $9 million below our estimate despite a contribution from an acquisition. The company signed 18 contracts worth $10 million or greater vs. seven a year ago. Despite recent acquisitions in the distributed space, Computer Associates' mix of business continues to favor the mainframe. Our fiscal 2006 (ending March) estimate for revenue rises to $3.85 billion from $3.8 billion, but our operating earnings per share estimate falls to 92 cents from $1.01 to reflect expensing of stock options. Our target price is $31, at 34 times historical p-e on our fiscal 2006 estimate. Pfizer (PFE ): Reiterates 3 STARS (hold) Analyst: Herman Saftlas The FDA is investigating incidences of blindness possibly linked to Viagra. However, linkage may be inconclusive, since the type of blindness found is also associated with men with diabetes and heart disease, conditions that also cause erectile dysfunction. Also, the incidence of blindness is rare - only 50 out of 23 million Viagra users. We don't think Viagra is threatened, though its warning label may be expanded. Our target price remains $29, a discount to peers' p-e of 13.3 times our 2006 estimate. We think that p-e is reasonable, based on Pfizer's pipeline and Lipitor litigation risks. TiVo (TIVO ): Maintains 3 STARS (hold) Analyst: Amy Glynn, CFA After TiVo's conference call, we note that some of April-quarter upside came from lower-than-expected rebate redemptions, not likely to be an ongoing benefit. But with record service gross margin, we think TiVo is starting to leverage its infrastructure, and demonstrate a clearer path to profitability. Also, despite our view that competition will intensify, subscriber growth remains strong. We are narrowing our fiscal 2006 (ending January) loss per share estimate to 15 cents from 24 cents, and raising our 12-month target price $2 to $8.50 on a price/sales ratio that is higher, but below historical average. Siebel Systems (SEBL ): Reiterates 2 STARS (sell) Analyst: Jonathan Rudy, CFA, Zaineb Bokhari In an 8-K filed on May 26, Siebel disclosed that its compensation committee had approved an employee retention program that it expects will help stave off departures resulting from market speculation about a potential takeover of the company. To us, this program reads like an anti-takeover defense. We have concerns about Siebel's corporate governance practices owing to its takeover defenses, among other factors. In our view, this program adds to our concerns. With disappointing execution and recent management turnover, we would sell Siebel shares. Celgene (CELG ): Reiterates 4 STARS (buy) Analyst: Frank DiLorenzo, CFA ) Novartis gets the FDA okay for Focalin XR to treat attention deficit hyperactivity disorder. Celgene is entitled to royalties. We think Celgene's guidance for $60 million in Ritalin-related royalties for 2005 is achievable. We expect approval for Thalomid to treat multiple myeloma and Revlimid to treat myelodysplastic syndrome patients with 5q chromosomal deletion by 2005 end. We see 2005 and 2006 earnings per share at 56 cents and 94 cents. Based on net present value analysis, our 12-month target price is $50. We think Celgene's 1.4 times p-e-to-growth is attractive, on our 2006 earnings per share and 30.5% earnings per share growth estimates. Credence Systems (CMOS ): Maintains 3 STARS (hold) Analyst: Colin McArdle Credence Systems posted April-quarter per-share operating loss of 9 cents, vs. earnings per share of 5 cents, in line with our estimate. GAAP loss was 41 cents after restructuring charges. Revenue of $102 million is 10% higher than our projection, as a 27% sequential increase in new product revenue more than offset the impact of a challenging overall operating environment. Credence Systems guides for a July-quarter loss of a penny to 4 cents, narrower than the 7-cent loss we had estimated. We are narrowing our fiscal 2005 (ending October) loss estimate to 27 cents, from a loss of 51 cents, but maintaining our peer-based 12-month target price at $8. Chico's FAS (CHS ): Reiterates 4 STARS (buy) Analyst: Marilyn Driscoll-CFA Chico's beats our 25 cents April-quarter earnings per share estimate, posting 26 cents vs. 20 cents earnings per share. Same-store sales rose 11%, but is accelerating in May as more new goods flow to stores. White House/Black Market same-store comps are running 30%-plus and the Black Book loyalty program is rapidly attracting new members. Chico's Platinum sub-brand extends beyond denim this fall to khakis, basic black pants and white shirts. We are lifting our fiscal 2006 (ending January) estimate by 5 cents to $1.05, and our 12-month target price to $38 from $33, applying historic second-year average forward p-e of 28.6 to our fiscal 2007 earnings per share estimate of $1.33. Abbott Laboratories (ABT ): Maintains 4 STARS (buy) Analyst: Frank DiLorenzo, CFA Abbott's Zemplar capsules receive FDA approval to prevent and treat secondary hyperparathyroidism in predialysis chronic kidney disease patients. While this was expected, we see Abbott's pipeline supporting low double-digit earnings per share and revenue gains over the next four years. We also expect FDA approval of Humira to treat psoriatic arthritis by the fourth quarter of 2005, and approval of Febuxostat (to be marketed by the TAP Pharmaceuticals joint venture) for gout by the end of 2005. We see earnings per share of $2.51 in 2005 and $2.80 in 2006. Based on discounted-cash-flow analysis, our 12-month target price remains $54.  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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