Downgrading to 4 STARS (accumulate) from 5 STARS (buy)
Analyst: Mark Basham
S&P does not expect further expansion in the Techne's valuation. Shares of the biotechnology research products company have recovered nicely over the period since market's September low. S&P's discounted cash flow analysis suggests that the stock is near the low end of its intrinsic value range, which he now calculates at $37-$39, which is slightly lower than the prior $38-$40 target because of the backup in risk-free interest rate. Further upside is likely with earnings growth, but S&P does not expect further expansion in valuation. As Techne is now at the low end of the new range, S&P would take a less aggressive stance.
Dow Chemical (DOW
Still 3 STARS (hold)
Analyst: Richard O'Reilly
The chemical company sees its fourth quarter earnings per share below earlier guidance of $0.10 to $0.20 vs. a year ago's figure of $0.16, but it made no new estimate. In a brief announcement, the company cites lower volumes than expected plus continued margin compression for commodity products. The company is feeling December's volumes were hurt by the unusual amount of customer downtime and inventory reductions. Weak demand led to lower feedstock costs in plastics being passed on to customers. S&P is cutting its fourth quarter profit estimate of $0.l2 a share to $0.05 from $0.12 and his 2001 estimate to $0.58 from $0.65. S&P's 2002 estimate of $1.75 a share may be optimistic. With earnings per share pressure, the stock is seen as an average performer.
Peregrine Systems (PRGN
): Reiterates 5 STARS (buy)Analyst: Mark Basham
Investors have a better opportunity to buy the shares after the selloff on Jan. 3. Management confirms overall U.S. business improved sequentially from September to December, although transition in business integration line to reseller channel was difficult. Even though European IT spending is likely to follow a U.S. upturn by the second quarter of 2002, Peregrine's problems there have been aggravated by the replacement of its European general manager. S&P thinks this execution issue is readily fixable. S&P is cutting its fiscal 2002 (Mar.) pro forma EPS estimate from $0.38 to break-even, and its fiscal 2003 forecast from $0.55 to $0.40.
Pier 1 Imports (PIR
): Still 4 STARS (accumulate)Analyst: Maureen Carini
After December same-store sales climbed 14%, the company now sees fourth-quarter EPS of $0.44 to $0.46, versus previous expectations of $0.40 to $0.42. Pier 1 also projects same-store sales for January will rise about 8% to 10%, with total sales up 17% to 19%. S&P remains encouraged by Pier 1's more profitable sales mix and good control over operating expenses. Newly arriving Spring and outdoor merchandise is being well-received by customers. S&P is raising its fiscal 2002 (Feb.) EPS estimate to $1.00 from $0.96, and its fiscal 2003 projection by $0.05 to $1.15. The shares are attractive at 15 times the fiscal 2002 estimate.