Markets & Finance

S&P Says Still Buy Lehman Brothers, Despite Net Drop


Lehman Brothers Holdings (LEH): Reiterates 5 STARS (buy)

Analyst: Robert McMillan

The company posted February quarter EPS of $0.99 vs. $1.39, above expectations. Net revenues fell down 15% as Lehman's lower principal transactions and investment banking revenues outweighed higher commissions and net interest income. Fixed income still is very strong, and the equity business should pick up later in the year. Lehman remains well positioned for 2002, continuing to gain market share in the equities business. S&P is reviewing its estimates. Shares are very attractive on a modest 13.6 times the Street's $4.79 fiscal 2002 (Nov.) estimate, and on Lehman's improving franchise and good long-term prospects.

FedEx Corp. (FDX)

Analyst: James Corridore

The company posted February quarter earnings per share of $0.39 vs. $0.37 -- beating the $0.36 Street mean, which was raised in mid-quarter on FedEx's guidance. Net profits rose 11%. Revenues rose 4% on strength in FedEx's ground segment. Margins benefited from cost controls and improved ground yields. The company reaffirmed May quarter EPS guidance of $0.70-$0.80.

S&P is raising the fiscal 2002 (May) EPS estimate by $0.05, to $2.45, and is upping the fiscal 2003 estimate to $2.85, from $2.80. At 20 times S&P's fiscal 2003 target, shares are valued below peers. S&P thinks there's room for additional price appreciation on a potential price-to-earnings expansion and positive EPS surprises as the economy continues to strengthen.

Triquint Semiconductor (TQNT): Downgrades to 4 STARS (accumulate) from 2 STARS (avoid)

Analyst: Thomas Smith

The company narrowed its March quarter guidance slightly to the low end of the range. He sees June quarter results similar to the March quarter. Weakness continues in optical networking chips. Wireless chips and most other segments are stable to improving. Wireless book-to-bill ratio is above 1.0 for the first time since 2000. Revenue recovery is pushing out one quarter. S&P is reducing its $0.10 EPS estimate for 2002 to $0.05. S&P sees $0.30 in 2003, cut from $0.35. At 39 times S&P's 2003 estimate -- above the information technology sector's 27 times, valuation is high for such a slow comeback. S&P advises that investors take a less aggressive stance.

Mercury Computer (MRCY): Maintains 3 STARS (hold)

Analyst: Megan Graham Hackett

Mercury sees revenues of $32-$35 million, down roughly 10% from the December quarter, vs. its earlier guidance of up 10%-12%. S&P forecasts EPS of $0.05-$0.12, compared with the Street;s mean of $0.24. The company cited delayed shipments to the defense industry. Mercury also sees June quarter revenues of $40-43 million -- about $10 million short of expectations. While the news disappointing, Mercury also noted that its order rate had improved and its backlog grew 38% to $49 million from a low of $35 million in September 2001. S&P says it will update after Mercury's 9:00 a.m.conference call on Thursday, March 21.


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