Markets & Finance

Still Hold Merrill Lynch


Merrill Lynch (MER):

Still 3 STARS (hold)

Analyst: Robert McMillan

Brokerage Merrill Lynch is reportedly contemplating the sale of its Canadian brokerage firm. It is in the process of rationalizing its business, focusing more on higher-margin businesses and looking to jettison less strategic ones.

McMillan said he views the process as positive and believes it will position Merrill to benefit once markets recover. McMillan is maintaing his earnings per share estimates of $2.39 in 2001 and $2.97 in 2002. Given the still weak market conditions, ongoing restructuring and his 16 times price to earnings ratio on his 2002 earnings per share estimate, shares he says remain fairly valued.

Anheuser Busch (BUD):

Still 5 STARS (buy)

Analyst: Richard Joy

Analyst Joy said the brewing company reiterated its previous positive outlook. The company is on track for a 12% earnings per share gain in 2001, and at least 10% for 2002. Joy said he is keeping our his 2001 and 2002 earnings per share estimates of $1.89 and $2.11, respectively.

The recent round of price hikes is getting successful reaction in the marketplace, Joy said. More increases are planned for early 2002. October volumes are encouraging, he says, with comparable sales to retailers up 1.6%. Joy said shares remain attractive at 20 times his 2002 estimate, given BUD's market dominance, growing free cash flow and consistent operating results.

Qualcomm Inc. (QCOM): Maintains 3 STARS (hold)

Analyst: Ari Bensinger

The wireless technology company posted weaker than expected October quarter pro forma earnings pr share of $0.20 vs. $0.23, on lower accrued carrier loan interest. Sales were up 6% sequentially, below S&P's 10% estimate, impacted by an accounting change, in which licensees originally recorded upon signing are now amortized. Amid the weak telecom environment, the company lowered its fiscal 2002 (Sep.) EPS guidance to $1.10-$1.20 vs. the $1.23 Wall Street mean. S&P sees enormous CDMA market opportunity with implementation of next generation CDMA-2000 1X products, but the stock's premium valuation of 43 times S&P's fiscal 2002 EPS estimate of $1.17 and 25 times the fiscal 2002 sales estimate tempers enthusiasm.

Univision Communications (UVN): Maintains 3 STARS (hold)

Analyst: Howard Choe

The Spanish-language broadcaster posted Q3 EPS of $0.03 vs. $0.12, $0.03 lower than S&P's estimate. Revenues and EBITDA (earnings before interest, taxes, depreciation and amortization) were up 5% and 4%, respectively; flat on a same-station basis. Univision fared well compared to industry, and increased its market share. The impact of the September 11 attacks was estimated at $5 million. Like its peers, Univision states poor visibility, and lowered Q4 and 2001 guidance. The company's 2001 median revenue and EBITDA revisions were 3.5% and 9.5% lower than S&P's estimates. S&P lowered its 2001 EPS estimate to $0.28 from $0.31 and its 2002 forecast to $0.30 from $0.40. S&P thinks the shares are fairly valued at 19 times EBITDA, a premium to the company's peers.

RehabCare (RHB): Reiterates 5 STARS (buy)

Analyst: Mark Basham

The provider of health care staffing services named the head of its well-run contract therapy division, G.F. Bellomy, to lead its staffing group, its largest division. Problems in staffing led the company on Oct. 30 to lower Q4 guidance from $0.46 to $0.41-$0.42, and warn of the probable effect in Q1. S&P estimated the company's top-line to be cut by $5 million and operating income by $2.5 million, or $0.08 per share. This indicates that this is an operational issue, not a slowdown in the staffing market. RehabCare is acting aggressively to mend the problem. S&P raised its estimate of the EPS impact from $0.08 to $0.12, with $0.05 in Q4 and $0.07 in 2002.S&P lowered its $2.07 2002 estimate to $2.03.


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