Markets & Finance

Amazon.com Still a Hold


Amazon.com (AMZN): Reiterate 3 STARS (hold)

Analyst: Scott Kessler

Co. announces mixed preliminary Q4 results. Revenue to be above $960 million, or about 4% less than our estimate, representing growth of 40%. Results somewhat disappointing in light of reduced competition compared with last year, particularly in toy segment. However, achieving low-end of guidance in tough economic environment deserving of some praise. Although AMZN will post Q4 operating loss, solid execution has led to margins improving consistently over past year. See AMZN shares range-bound, restricted by consumer spending slow-down, money-losing model.

Masco Corp. (MAS): Reiterate 3 STARS (hold)

Analyst: Michael Jaffe

Co. sees Q4 '00 EPS of about $0.30 vs. previous $0.34 to $0.37 guidance, and thinks '01 EPS will approximate $1.40 compared with Street forecasts of $1.50 to $1.70. cites weaker than expected economic and business conditions in its markets, with high energy costs also hurting near-term results. But on positive side, MAS sees Q1 '01 marking EPS floor of cycle. Cutting '00 est. to $1.50 from $1.57, `01's to $1.45 from $1.65. Despite weak near-term outlook, would hold industry leader for recovery driven by better interest rate trends.

MiniMed Inc. (MNMD): Reiterate 4 STARS (accumulate)

Analyst: John Massey

Q4 revenues $91-$92 million, low-end of previous guidance, $2 million below our estimate. due to lower than expected December U.S. pump sales. still 28%-30% revenue growth. Q4 EPS $0.17, below our estimate. FDA to subject consumer continuous glucose monitor to panel review, resulting in delayed launch. Still see '01 EPS of $0.80. Shares well off their high, reflecting market disdain for high growth, P/E. At 41X our '01 EPS estimate, with a strong product pipeline, believe MNMD will regain momentum.

Airgas Inc. (ARG): Reiterate 3 STARS (hold)

Analyst: Richard O'Reilly

Co. pre-announced that FY (Mar.) Q3 EPS will be below expectations. Sees $0.10-$0.12 vs. consensus and yr. ago's $0.15. Saw December same store sales decline 3%, following 5% increases earlier in qtr., 4.4% in prior qtr. Excluding severe weather, co. estimates sales were flat, which may reflect downturns in industrial activity. also cites impact of higher labor, fuel costs. May take cost reduction steps, charges in Q4. Cutting our FY 01 (Mar.) est. to $0.55 from $0.60 vs. 0.52, putting FY 02 estimate under review.

Nokia (NOK): Reiterate 4 STARS (accumulate)

Analyst: Ari Bensinger

Co. sold 128 million mobile phones in '00, slightly below our 130 million estimate. Estimates total '00 mobile phone market at 405 million units, below our 420 million estimate. Dynamics of industry changing as carriers concentrate on profitability over raw subscriber growth. However, believe transition to Internet-enabled phones (general packet radio service phones will be produced in volume during '01) will fuel increased subscriber rate and faster replacement cycle in '01. Given leading market share and strong execution, NOK remains attractive.

Edison International (EIX) and PG&E Corp. (PCG): Reiterate 2 STARS (avoid)

Analyst: Justin McCann

Shares of EIX down about 6% and PCG down about 5% in wake of California Governor's speech. While Governor stated that he would not allow utilities to slide into bankruptcy, plan did not address issuance of state bonds that could cover good portion of their unrecovered power costs. While today's meeting in Washington could result in agreement on regional price caps, will be up to Californian officials to come up with program that deals with immediate crisis. Recommend avoid shares until uncertainties resolved.

H&R Block (HRB): Reiterate 3 STARS (hold)

Analyst: Michael Schneider

Announced annual growth targets at today's investor and analyst conference. included revenue growth of 10%-15%, EPS growth of 13%-18% and annual ROEs of 20%+. HRB also said it is comfortable with Street EPS expectations for FY 01 (Apr.). Some marketing expenses may advance from FY Q4 to FY Q3, lowering FY Q3's results by $0.04-$0.06. But this should have no impact on full FY results as total expected marketing spending in 2nd half remains unchanged. See FY 01 EPS of $2.90.

Williams Cos. (WMB): Reiterate 5 STARS (buy)

Analyst: Ephraim Juskowicz

Co. to sell 30 mln. common shares. Along with broad sector profit-taking, WMB down 8%. Given co.'s recent track record of sigificantly beating estimates, boosted by strength from commodities trading, think Q4 EPS will again beat consensus, despite planned 6.7% dilution.. Leaving our '00 EPS est. at $1.35. WMB poised to gain from continued strong natural gas fundamentals. Proceeds of nearly $1 billion from sale of shares will be used to fund energy capital spending, reduce debt.. With P/E to growth of 1.7X, see weakness today as buying opportunity.

Corus Group (CGA): Upgrade to 3 STARS (hold) from 2 STARS (avoid)

Analyst: Leo Larkin

Based on expectation for more favorable Exchange rate between British pound and euro. CGA world's 5th largest steel co. with operations in the UK and mainland Europe. Strength in pound sterling vs. Euro has led to lower sales, losses for Corus. believe worst of currency impact over with Euro now in apparent uptrend, should boost UK steel price vs. mainland Europe, lead to recovery in sales, return to profitability. But, with pending restructuring of UK operations, CGA only a hold for now.

PMC-Sierra (PMCS): Initiating coverage with

3 STARS (hold)

Analyst: Thomas Smith

Leading maker of semiconductor solutions for high-performance communications markets experiencing rapid growth. driven by Internet boom, upgrades of corporate data networks. Stellar sequential revenue growth rates above 30% in last two quarters bound to slow with economy. Still, see double-digit sequential revenue growth through '01. PE of 42X our $1.65 '01 EPS estimate (before goodwill, charges) about twice broader market, but in line with peers. Hold pending firmer news on economy. Extended selection of S&P Stock Picks and Pans is available for free for a limited time only


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