Markets & Finance

Still Hold GE


UPS (UPS): Reiterates 3 STARS (hold)

Analyst: Michael Jaffe, James Corridore

UPS posted second quarter earnings per share of $0.54 vs. $0.55, in line with the Street. UPS saw strong foreign results offset by a modest downturn in the U.S., where results were hurt by a still slow economy and a potential strike by Teamsters. Results were early because of UPS's inclusion in the S&P 500 at the market's close on July 19, at which time UPS plans a public offering of 32.5 million shares. S&P continues to estimate $2.20 EPS in 2002. UPS is a powerful force in ground delivery, but with labor uncertainties and a premium valuation of 28 times S&P's 2002 forecast, S&P would not currently add to positions.

General Electric (GE): Maintains 3 STARS (hold)

Analyst: Robert Friedman

Although GE posted a 13% rise in reported second quarter earnings per share to $0.44, core EPS rose only 5.5%, to $0.38, after stripping out on-operating income tax settlements and pension effects. Moreover, second quarter operating cash flow actually fell 2.8%. S&P views these adjusted results as indicative of GE's ongoing quality of earnings issues. Even if GE's 10%-plus growth projections were based on high earnings quality, S&P believes the shares are still not trading at bargain levels. S&P's free cash models value GE shares at $25-$30.

Duke Energy (DUK): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: Joseph McCann

Duke's share price is down Friday following announcement that the company has received subpoenas from federal agencies related to its energy trading activities. While the stock of this financially strong energy company seems attractive on a valuation basis at nine times S&P's 2002 earnings per share estimate of $2.70, S&P thinks that the uncertainty surrounding these investigations and the weakness of the wholesale energy market warrants a more cautious stance.

BlackRock (BLK): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: Robert McMillan

BlackRock posted second quarter earnings per share of $0.53 vs. $0.40; above expectations. Results were helped by a 16% rise in revenues on a 17% jump in assets under management to $250 billion. S&P thinks investors will continue to pour money into BlackRock's relatively safer money market fund products, given the volatility and pessimism in the stock market. S&P is reviewing its estimates. Although shares are trading at a rich 21 times the Street's 2002 $2.03 EPS estimate, S&P thinks the shares are attractive on positive business prospects for money market and fixed income-focused funds vs. equity funds.


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