Markets & Finance

Accumulate Intuit


Intuit (INTU): Maintains 4 STARS (accumulate)

Analysts: Scott Kessler, Jonathan Rudy

Shares are up Friday on the news that Intuit reiterated its fiscal 2003 (July) earnings guidance. Additionally, Intuit completed the sale of its Japanese subsidiary for $79 million cash. S&P is maintaining its fiscal 2003 earnings per share estimate at $1.42. Tax season is also just about here, which is generally a strong period for sales of Intuit's tax-return software. At a price notably below S&P's intrinsic-value estimate based on a discounted cash flow analysis, S&P thinks Intuit shares remain attractive.

Regis Corp (RGIS): Maintains 4 STARS (accumulate)

Analyst: Dennis Milton

Shares are down more Friday after the hair salon operator and franchiser reported that domestic same-store sales in January fell 2%, year to year, impacted by harsh winter weather and a sluggish economy. However, total revenues increased 17%, due to the company's expansion and improved sales in Europe. At only 10 times S&P's fiscal 2004 (June) earnings per share estimate of $2.11, shares trade at a discount to the overall market, despite the company's superior growth prospects. With ample opportunity to expand, S&P thinks Regis can grow earnings per share 15% annually over the next several years.

Cigna (CI): Upgrades to 3 STARS (hold) from 2 STARS (avoid)

Analyst: Phillip Seligman

This employee-benefits organization posted operating earnings per share $1.27 vs. $1.88 -- 11 cents above S&P's estimate. Cigna sees $6.25 to $6.50 in 2003 on savings from restructuring, a flat-to-down medical loss ratio, growth of specialty units, and a lack of large-case losses. Medical members are seen down 1%-2%. S&P is encouraged by turnaround steps including service improvements, but is wary of Cigna's operating growth assumptions. S&P says hold this company, with shares trading at eight times S&P's 2003 core earnings per share estimate of $5.85, (a 12-cent stock option cost, and a three-cent defined pension charge) vs. 12% long-term growth.

John Hancock (JHF): Upgrades to 3 STARS (hold) from 2 STARS (avoid)

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Analyst: Catherine Seifert

The financial services firm posted fourth quarter operating earnings per share of 78 cents vs. 71 cents one year earlier, above Wall Street's and S&P's forecasts. Full-year operating earnings per share were $2.82 vs. $2.62. Fourth quarter results were paced by increases of 26% in long-term care and 35% in non-traditional life profits, partly offset by weak variable annuity and asset management results. S&P sees double-digit life and long-term care sales growth plus stable spreads driving 2003 results. Also, S&P is raising its 2003 estimate by 10 cents, to $3.05, but says its outlook for the stock is tempered by Hancock's bond portfolio exposure to troubled industries. The shares are O.K. to hold on their modest valuation and Hancock's stable outlook.

Johnson & Johnson (JNJ): Still 4 STARS (accumulate)

Analyst: Herman Saftlas

Pharmaceutical giant Johnson & & Johnson is rumored to be negotiating the acquisition of Scios for about $2 billion, according to The Wall Street Journal. While such a deal would probably be initially dilutive, it would help beef up J&J's flagging R&D drug pipeline. Scios' key product is its Natrecor treatment for congestive heart failure with about $500 million peak revenue potential. J&J is also working on an oral drug for rheumatoid arthritis. Near term, J&J will get a boost from FDA approval of its new Cypher drug-coated stent. Its shares are valued in line with Big Pharma's average price-earnings multiple of 19 times S&P's 2003 earnings per share estimate.

Pixar (PIXR): Reiterates 2 STARS (avoid)

Analysts: Massimo Santicchia, Mark Basham

Film animation company Pixar posted December-quarter earnings per share of 31 cents vs. 25 cents, well above S&P's estimate of 20 cents on greater than anticipated home video revenues from Monsters, Inc. and other library titles. As of year-end, Pixar had cumulative Monsters, Inc. home video sales of 30.4 million units. The worldwide theatrical and domestic home release of Finding Nemo is expected on May 30. Pixar is guiding to earnings per share of $1.39 in 2003, well below S&P's estimate of $1.70. With a large dependence of its success of the new issue of Finding Nemo, and with shares trading at 29 times S&P's 2003 estimate, S&P is keeping a cautious stance.


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