Markets & Finance

JDS Uniphase Still a Buy


JDS Uniphase (JDSU): Reiterates 5 STARS (buy)

Analyst: Ari Bensinger

The fiber-optic company posted Q2 EPS $0.21 vs. $0.09, a penny above the mean. Sales rose 161%, up 18% from Q1. Given its lower visibility and customer inventory adjustments, JDS Uniphase sees Q1 revenue growing 7%-10% sequentially vs. prior mid-teen guidance. The company confirmed its overall fiscal 2001 (June) sales growth will be a robust 115%-120%. JDS Uniphase is reallocating orders to new customers and is upping its fiscal 2001 (June) EPS estimate by $0.02 to $0.82. Despite temporary lumpiness, the firm's underlying growth driver -- demand for bandwidth -- remains unabated. S&P views JDS Uniphase as a core holding in the rapidly growing optical market.

Gillette (G): Reiterate 4 STARS (accumulate)

Analyst: Howard Choe

Before restructuring charges, Gillette posted Q4 EPS $0.33 vs. $0.32, in line with S&P guidance and a penny higher than consensus. Sales are up 1%, but would have risen to 8% without the company's White Rain divestiture. Blades and razors and batteries sales are better than expected. While S&P' doesn't have margin details yet, S&P expects advertising and promotional spending to have risen modestly to support battery promotions. Gillette has the best margins in the business. Duracell is gaining share in the premium market but losing in the mass market. Though Gillette's not out of woods yet, S&P believes the shares will climb, with new management and core products showing strength.

PMC-Sierra (PMCS) Downgrades to 2 STARS (avoid) from 3 STARS (hold)

Analyst: Thomas Smith

PMC Sierra posted Q4 2000 pro forma EPS $0.34 vs. $0.11, a penny above consensus. Revenue rose 152% and was up 17% quarter over quarter. Shares swatted down to $64 after-hours Thursday from $96 at close. The network-solutions developer made its numbers this quarter, but S&P thinks the firm's inventory correction is hitting very hard. PMC expects revenue to drop 25% in Q1 2001 vs. Q4 2000, with no visibility for Q2. By the second half of the year, sequential revenue growth should perk up to 8-12% after excess inventory is used. End demand remains robust. The firm is cutting its $1.65 2001 EPS estimate to $0.70. Given the uncertain outlook and an implied PE near 91 times its EPS, S&P believes investors should avoid the stock for now.


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