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Bargains: Drugs, Cruises, Tin Cans


Inside Wall Street

BARGAINS: DRUGS, CRUISES, TIN CANS

A lot of people complain that the rampaging market offers few good buys. "Bunk," says Carol McMurtrie, a managing partner at Loomis Sayles, which steers $44 billion in assets.

If you look in the right places for "smart" stocks, bargains abound, she argues. Three picks: Eckerd (ECK), the nation's third-largest drug chain, with more than 1,705 stores in the Southeast and Texas; Carnival (CCL), which operates about 20 cruise ships; and Crown Cork & Seal (CCK), a maker of metal and plastic packaging products.

These companies, she explains, have innovative managers and snappy prospects. "I'm always looking for value," says McMurtrie--and Eckerd, Carnival, and Crown Cork all have "unrecognized growth potential and underpriced assets."

Loomis Sayles analyst Lauren Allansmith says Eckerd's Sunbelt markets have "the strongest long-term earnings-growth potential." And the fierce competition in drugstores has forced many independents and small chains to sell out to larger operators.

Allansmith thinks Eckerd itself is a potential buyout target. "It could be acquired by Rite Aid, whether or not Rite Aid's proposed acquisition of Revco goes through." Rite Aid has little presence in the Sunbelt.

Now at 47, Eckerd stock is worth at least 55, figures Allansmith, based on her earnings projection of $3.41 a share for the year ending Jan. 30, 1997, up from the $2.99 estimate for fiscal 1996.

In the cruise business, competition has also been stiff, but Carnival, which has 28% of the market, continues to strengthen--as its rivals get out of the water or are acquired by larger companies. Some analysts think Carnival's major stake in Kloster Cruise may enable it to acquire its Norwegian Cruise Line. Jay Pearlstein, an analyst at Loomis Sayles, sees Carnival's stock, now at 28 a share, hitting the high 30s this year. He expects Carnival to make $2.15 to $2.20 next year, a leap up from 1996's estimated $1.80 and 1995's $1.59.

McMurtrie says it's hard for a mundane packaging maker such as Crown Cork to "look like a sexy investment play," but it's poised to be the world's largest packaging company--after its acquisition of CarnaudMetalBox, a French packager.

The acquisition gives Crown Cork added bargaining power, says Allansmith, with its giant global customers, such as Coca-Cola, and with raw-material suppliers, such as Eastman Chemical. Now at 49, the stock should hit 60 in a year or so, says Allansmith. Analysts expect Crown Cork to earn $2.65 this year and $3.75 a share in 1997.BY GENE G. MARCIAL


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