Markets & Finance

S&P Keeps Buy on Intuit


Intuit (INTU): Maintains 5 STARS (buy)

Analyst: Scott Kessler

The software stock is up nicely, despite a weak technology sector, on news that April quarter revenues will be at the high end of prior guidance and EPS will be some $0.05 higher than prior expectations. Although S&P's April quarter revenue estimate was already quite high, s&P is upping it another 2% to $540 million. S&P now expects the current Street fiscal 2002 (July) consensus EPS forecast of $1.04 to approach the high-end estimate of $1.16, which S&P increased from $1.15. As issues loom regarding many tech stocks, Intuit is showing why it is compelling at a fiscal 2003 price-earnings-to-growth ratio of 1.3.

Ciber (CBR): Downgrades to 2 STARS (avoid) from 3 STARS (hold)

Analyst: Mark Basham

Ciber is among technology stocks that have pre-announced weak first quarter results. Ciber sees modestly profitable quarter on revenues about 5% below the fourth quarter level. S&P is cutting its $0.30 EPS estimate for 2001 to $0.22, and $0.45 for 2003 to $0.40. The subdued recovery in IT spending could complicate the integration of acquisitions that Ciber completed in the second half of 2001. S&P sees Ciber as being fully valued at approximately 20 times the 2003 estimate, and thinks the negative backdrop will make it difficult for shares to match the market.

Keane (KEA): Downgrades to 2 STARS (avoid) from 1 STAR (sell)

Analyst: Mark Basham

Amid adverse first quarter guidance from various technology companies, S&P doesn't see Keane as evading a delayed recovery in tech spending. S&P is reducing the 2002 EPS estimate from $0.50 to $0.43, and trimming 2003's from $0.70 to $0.60. S&P is concerned about the reluctance of companies to spend on IT, and also has added concerns about Keane. These concerns include the integration of the company's Metro and SignalTree acquisitions, reduction in cash balances from SignalTree deal, and a 39% jump in minimum rent payments over 2001. Also, Keane is committed to lease more space in 2003 from a partnership in which the Keane family has interests. S&P's intrinsic value target: $12.

IBM Corp. (IBM): Downgrades to 4 STARS (accumulate) from 5 STARS (buy)

Analyst: Megan Graham Hackett

The company preannounced a first quarter shortfall, and now sees revenues of $18.4-$18.6 billion -- below the Street's mean of $19.7 billion. IBM also sees earnings per share of $0.66-$0.70 vs. the Street's mean of $0.85. The miss is significant, but not unexpected given the typical weakness in IT spending in the first quarter, which was exacerbated by overall caution by customers following the fourth quarter's GDP slump. S&P estimates that most of shortfall came from IBM's original equipment manufacturer business, which saw a 35% decline in revenues, and a loss of $0.08 a share. At 22 times S&P's $4.00 2002 EPS estimate -- below peers, but with IT uncertainty, S&P thinks the expected profit and revenue miss warrants some caution.

Ameritrade Holding (AMTD): Maintains 1 STAR (sell)

Analyst: Robert McMillan

The online brokerage firm agreed to acquire Datek Securities for $1.3 billion in stock. Though the immediately accretive merger should help reduce the overcrowded online brokerage field, S&P is concerned that Ameritrade is increasing its exposure to the volatile online trading business. The company also said that its March quarter earnings per share would come in near lower end of Wall Street's $0.02-$.10 estimate range. S&P is keeping its $0.02 estimate. With shares trading at a relatively rich 35 times S&P's fiscal 2002 (Sept.) $0.18 EPS estimate, S&P sees shares significantly underperforming the S&P 500 over the next six to 12 months.

Computer Associates (CA): Maintains 3 STARS (hold)

Analyst: Jonathan Rudy

The comapny announced that it will meet prior revenue guidance of $770 million for the March quarter, and anticipates that the loss per share will be better than prior guidance of $0.04-0.05. Cash flow from operations is expected to be approximately $430 million, bringing the fiscal 2002 (March) total to over $1.1 billion. Computer Associates also is selling certain supply chain management, and financial and human resources management product lines to SSA Global Technologies. While the news is positive in this challenging environment, with a cloud of SEC inquiry hanging over Computer Associates, S&P says it would not add to positions.


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