): Maintains 3 STARS (hold)
Analyst: James Kartsonas
Andarko agreed to acquire Howell Corp. for about $200 million in cash and the assumption of $65 million in debt. Andarko is getting approximately 50 million barrels of oil equivalent of reserves (mostly oil) primarily located in Wyoming, and is paying about $5.30 per proven barrel. S&P views the acquisition as a good fit to Andarko's existing strategy, especially given its expertise in enhanced recovery as well as its plans for $200 million worth in infrastructure projects in the area. The acquisition will be accretive to earnings and cash flow, and will add about 12.1 million barrels a day to current production.
D.R. Horton (DH
): Initiates with 5 STARS (buy)
Analyst: Michael Jaffe
One of the nation's largest builders, D.R. Horton has posted vast growth in the past decade through takeovers plus a focus on internal gains. With mortgage rates likely to stay low over the next year, D.R. Horton should be aided by positions in demographically favorable areas such as California and Arizona, and a focus on entry-level and first move-up buyers. S&P sees fiscal 2002 (Sept.) earnings per share of $2.80, an fiscal 2003's at $3.25. With shares trading at six times the fiscal 2003 estimate, which is at the low-end of historical valuation, D.H. Horton is an attractive play on S&P's call for ongoing housing strength.
Extreme Networks ( (EXTR
): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)
Analyst: Mark Basham
The company sees revenues of $100 million, vs. S&P's $114 million forecast, with a loss of $0.03-$0.04 vs. S&P's $0.03 profit estimate. Although the comapny suggests from a book-to-bill ratio above 1.0 that the second quarter will show sequential improvement, S&P views this as insufficient to maintain a positive stance, given the lower revenue base. A report suggests increasing softness in the enterprise switch market, where Extreme had been strong. With no fundamental catalyst, the stock likely to languish near $3 to $4 per share. /M.Basham\ Get Stock Report
): Maintains 3 STARS (hold )
Analyst: Thomas Smith, Robert Tortoriello
According to a Reuters story, the CEO lowered the sales guidance range for the third quarter to $6.3 billion to $6.7 billion, from $6.3 billionto $6.9 billion, saying sales would be slightly below the mid-point of previous range. S&P had already estimated sales of $6.4 billion, a 2% sequential rise, and saw a seasonal 4% sales rise in the fourth quarter. S&P estimates earnings per share of $0.52 in 2002, and $0.75 in 2003. At 19X times S&P's 2003 earnings per share estimate, shares trade above market, but S&P views the downside risk as lessened, and continues to recommend a neutral stance toward the shares.