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UTI Energy (UTI
): Upgrade to 5 STARS (buy) from 4 STARS (accumulate)
Analyst: Tina Vital
February natural gas prices at $9.8/Tcf, seen above $6/MM BTU thru `02 due to weather issues, tight supply, strong demand. Supply of land drilling rigs dwindling. See tremendous upside to natural gas land drillers, such as UTI, which shares bulk of domestic market with Nabors (NBR 59*****), Patterson Ener. (PTEN 37*****).. Based on revised long-term growth forecast of 45% vs. 35%, see '00 EPS at $0.31, raising '01 est. $0.12 to $1.15. Although shares trade at 29X '01 est., premium to peers, excellent value with P/E to growth of only 0.64.
Santa Fe International (SDC
): Downgrade to 4 STARS (accumulate) from 5 STARS (buy)
Analyst: Tina Vital
SDC has a strong balance sheet, excellent management. Plus, international drilling is in the early stages of a multi-year upturn; dayrates, utilization rates up & improving. But see company as a later play. Near-term costs increasing on upgrades, as well as the recently announced newbuild program. Also see operating costs rising in '01. SDC should benefit nicely in long run, saving by building at the beginning of the cycle. See $0.93 '00 EPS, lowering '01 EPS by $0.12 to $1.47.
Tyson Foods (TSN
) and IBP Inc. (IBP
): Reiterate 3 STARS (hold)
Analyst: Maureen Carini
IBP accepts TSN's sweetened buyout offer. TSN to pay $30 a share in cash and stock, beating out rival Smithfield Foods, $32 a share all stock offer. Subject to regulatory and shareholder approval, transaction expected to close in first quarter. Combination will triple TSN's sales to an estimated $24 billion, making company world's leading supplier of chicken, beef and pork. Deal should be immediately accretive. Putting TSN's FY 01 (Sep.) EPS estimate under review.
WebMD Corp. (HLTH
): Downgrade to 3 STARS (hold) from 4 STARS (accumulate)
Analyst: John Massey
HLTH taking full control of international J/V, but giving up $300M in advertising, first $100M in capital. News Corp. to get Health Network, but parting with 8.3 mln. HLTH shares. taking $275M Q4 charge. Risk rising as HLTH integrates acq.'s, reviews partnerships. New competition tempering our enthusiasm.. But, L/T opportunity remains intact if HLTH can overcome issues: Convince HMO's to participate in its network, get doctors to utilize its technology. Execution risk substantial.
Biovail Corp (BVF
): Reiterate 4 STARS (accumulate)
Analyst: Herman Saftlas
Planned purchase of Cardizem cardiovascular line from Aventis for $410 million should boost results. Will add over $140M to '01 sales, raise EPS to $1.23-$1.30 (over 50% gain from '00 estimates). But BVF's '01 generic sales will be lower than expected due to ongoing delays in Procardia XL launch. Planned 1.7-fold expansion of sales force to be EPS neutral in 01, & 02, reflecting launch of Cardizem XL, new partnering deals. '02 EPS seen in $1.60-$1.75 range. BVF has cutting edge drug delivery technology. Attractively valued at modest discount to peers.
SEI Investments (SEIC
): Reiterate: 4 STARS (hold)
Analyst: Markos Kaminis
Co. commented knows of no reason for share weakness. We believe profit taking is culprit in wake of '00 run up of 183%. Believe many investors chose to push capital gains off to '01 tax year, and are selling now. We still expect shares to benefit from solid long-term fundamental drivers, including baby boomers' growing investable wealth. Believe weaker economy will only increase outsourcing of back-office functions by financial institutions. At 44X our '01 EPS est., see SEIC benefiting from flight to quality.
): Reiterate: 5 stars (Buy)
Analyst: Maureen Carini
Q1 EPS $0.15 vs. $0.13, In line. Total sales rose 16% on an 11% gain in same-store sales. Comparable prescription sales climbed 18%, accounting for 58% of total volume. Company added 126 new stores during qtr., on target for total year goal of 500. Margin leverage aided by larger store base and well-controlled costs. With one-third of stores less than 3 years old, see maturation of base accelerating annual EPS growth to about 22% over next several years. Shares continue to warrant a premium valuation of 44X our FY 01 (Aug.) EPS estimate of $0.90.