Markets & Finance

WorldCom Delayed amid Giant Accounting Violation


WorldCom (WCOM) shares were delayed at $0.83 after saying it found a total of $3.852 billion in transfers from line cost expenses to capital accounts violated generally accepted accounting principles (GAAP). The company fired its chief financial officer, Scott Sullivan; senior VP and controller David Myers resigned. Robertson Stephens cut its rating on the shares to market underperform. S&P dropped coverage. According to CNBC, the Dept. of Justice will review WorldCom's books for evidence of potential criminal wrongdoing.

Digene (DIGE ) climbed after its the FTC said it won't block the acquisition by Cytyc (CYTC) unless Cytyc files a notice of intent to complete the deal. Digene says in light of the the FTC's antitrust concerns, it will evaluate its strategic options, including the option to terminate the deal if it's not completed on or before June 28.

FedEx (FDX) Deutsche Bank upgraded. Goldman reiterates market outperform. On Tuesday the company posted $0.78 vs. $0.64 fourth quarter EPS, and forecast $0.40-$0.50 first quarter EPS.

S&P says shares of Citigroup (C) are off amid fears over loan exposure to WorldCom. Given Citigroup's diversified loan portfolio, the news is unlikely to have significant impact on 2002 EPS. S&P keeps buy.

Supervalu (SVU) plans to record an after-tax charge of about $19M-$21M for inventory misstatements by a former employee. Excluding a charge, the company sees $0.56-$0.58 Q1 EPS vs. $0.58 consensus. S&P keeps hold.

Raymond James downgraded Frontier Air (FRNT) to market perform from strong buy.

EMC (EMC) shares were weaker after Salomon SB raises risk rating on EMC shares to high from medium, and cuts $15 target to $12. Yesterday, Standard & Poor's lowered EMC's corporate credit rating to BBB from BBB+.

Martha Stewart Living (MSO) could be under pressure on a Wall Street Journal report that prosecutors widened its probe of Martha Stewart to include a possible obstruction of justice, and for making a false statement related to the sale of ImClone (IMCL) shares.

Priceline.com (PCLN) expects second quarter revenue to come in about 5% below the low end of previous $320 million guidance, and pro forma EPS of about $0.03, at the low end of previous guidance.

Genesis Microchip (GNSS) announced the resignation of Amnon Fisher, president & CEO, effective immediately. Needham says it is concerned the leadership change may be destabilizing.

Metro One Telecommunications (MTON) sees better than expected second quarter EPS of $0.28-$0.30 on revenue of $67M-$69M, citing improved operating margins, which offset lower than expected call volume and total revenue. Needham raised its estimate.

Steris (STE) sees better than expected $0.14-$0.15 first quarter EPS, citing strengthening demand in the healthcare business. S&P reiterates buy.

Qwest Communications (Q) shares fell after The Wall Street Journal reported that the SEC is taking a tough stance on how the company accounted for as much as $1.4 billion in fiber optic capacity.

Lear (LEA) shares rose after Salomon SB upgrades to buy from outperform.

Prudential downgraded NVIDIA (NVDA) to hold from buy. The brokerage also cut Xilinx (XLNX), Lattice Semiconductor (LSCC), and (Altera ) (ALTR) to hold from buy.

McDermott International (MDR) sees a second quarter loss of about $3.82, including a write-off of about $3.65 per share. It now estimates a 2002 loss of $3.25-$3.35 per share. S&P downgraded to avoid, and Deutsche Bank also downgraded.

Matria Healthcare (MATR) cut its guidance for the second quarter to $0.10-$0.12 EPS from operations on revenues of about $69 million, and for 2002 to $0.68-$0.75 EPS on revenues of $277M-$283M. The company cited information system constraints and labor costs. First Albany and Wachovia reportedly downgraded the shares.

Micron Technology (MU) posted a worse than expected $0.04 third quarter loss vs. a $0.50 loss from continuing operations despite a 5.7% sales decline. S&P downgraded the shares to avoid. CSFB and Banc of America cut estimates.

Roxio (ROXI) cut its $0.15 first quarter EPS (pro forma) estimate to $0.02 on revenue of about $31M, vs. its previous guidance of $35M. Robertson Stephens downgraded to market perform from buy.

Avon Products (AVP) is comfortable it will meet or exceed the consensus second quarter EPS estimate of $0.63. The company reiterated its $2.30 2002 EPS guidance.

Health Management Associates (HMA) expects to exceed the $0.25 third quarter consensus EPS estimate, and sees $0.97 fiscal 2002 EPS, citing improving operations at recently acquired and same-hospital facilities.

Visteon (VC) sees better than expected second quarter net income of $70M-$75M, citing a healthier industry environment.


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